FIRST DIVISION

G.R. No. 215723, July 27, 2016

DOREEN GRACE PARILLA MEDINA, A.K.A. "DOREEN GRACE MEDINA

KOIKE," Petitioner, v. MICHIYUKI KOIKE, THE LOCAL CIVIL REGISTRAR OF
QUEZON CITY, METRO MANILA, AND THE ADMINISTRATOR AND CIVIL
REGISTRAR GENERAL OF THE NATIONAL STATISTICS OFFICE, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated July 31, 2014
and the Resolution3 dated November 28, 2014, of the Regional Trial Court of Quezon
City, Branch 106 (RTC), in Sp. Proc. No. Q-13-72692, denying petitioner's petition for
judicial recognition of foreign divorce and declaration of capacity to remarry pursuant to
Article 26 of the Family Code.

The Facts

Petitioner Doreen Grace Parilla (Doreen), a Filipino citizen, and respondent Michiyuki
Koike (Michiyuki), a Japanese national, were married on June 14, 2005 in Quezon City,
Philippines.4 Their union bore two children, Masato Koike, who was born on January 23,
2006, and Fuka Koike who was born on April 4, 2007.5 chanrobleslaw

On June 14, 2012, Doreen and Michiyuki, pursuant to the laws of Japan, filed for
divorce6 before the Mayor of Ichinomiya City, Aichi Prefecture, Japan. They were
divorced on even date as appearing in the Divorce Certificate7 and the same was duly
recorded in the Official Family Register of Michiyuki Koike.8 chanrobleslaw

Seeking to have the said Divorce Certificate annotated on her Certificate of

Marriage9 on file with the Local Civil Registrar of Quezon City, Doreen filed on February
7, 2013 a petition10 for judicial recognition of foreign divorce and declaration of capacity
to remarry pursuant to the second paragraph of Article 26 of the Family Code11 before
the RTC, docketed as Sp. Proc.No. Q-13-72692.

At the hearing, no one appeared to oppose the petition.12 On the other hand, Doreen
presented several foreign documents, namely, "Certificate of Receiving/Certificate of
Acceptance of Divorce"13 and "Family Register of Michiyuki Koike"14 both issued by the
Mayor of Ichinomiya City and duly authenticated by the Consul of the Republic of the
Philippines for Osaka, Japan. She also presented a certified machine copy of a
document entitled "Divorce Certificate" issued by the Consul for the Ambassador of
Japan in Manila that was authenticated by the Department of the Foreign Affairs, as
well as a Certification15 issued by the City Civil Registry Office in Manila that the original
of said divorce certificate was filed and recorded in the said Office. In addition,
photocopies of the Civil Code of Japan and their corresponding English translation, as
well as two (2) books entitled "The Civil Code of Japan 2000"16 and "The Civil Code of
Japan 2009"17 were likewise submitted as proof of the existence of Japan's law on
divorce.18chanrobleslaw

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 The RTC Ruling

In a Decision19 dated July 31, 2014, the RTC denied Doreen's petition, ruling that in an
action for recognition of foreign divorce decree pursuant to Article 26 of the Family
Code, the foreign divorce decree and" the national law of the alien recognizing his or
her capacity to obtain a divorce must be proven in accordance with Sections 2420 and
2521 of Rule 132 of the Revised Rules on Evidence. The RTC ruled that while the divorce
documents presented by Doreen were successfully proven to be public or official
records of Japan, she nonetheless fell short of proving the national law of her husband,
particularly the existence of the law on divorce. The RTC observed that the "The Civil
Code of Japan 2000" and "The Civil Code of Japan 2009," presented were not duly
authenticated by the Philippine Consul in Japan as required by Sections 24 and 25 of
the said Rules, adding too that the testimony of Doreen relative to the applicable
provisions found therein and its effect on the matrimonial relations was insufficient
since she was not presented as a qualified expert witness nor was shown to have, at
the very least, a working knowledge of the laws of Japan, particularly those on family
relations and divorce. It likewise did not consider the said books as learned treatises
pursuant to Section 46,22 Rule 130 of the Revised Rules on Evidence, since no expert
witness on the subject matter was presented and considering further that Philippine
courts cannot take judicial notice of foreign judgments and law.23 chanrobleslaw

Doreen's motion for reconsideration24 was denied in a Resolution25  dated November 28, cralawred

2014; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the RTC erred in denying the
petition for judicial recognition of foreign divorce.

The Court's Ruling

At the outset, it bears stressing that Philippine law does not provide for absolute
divorce; hence, our courts cannot grant it. However, Article 26 of the Family Code -
which addresses foreign marriages or mixed marriages involving a Filipino and a
foreigner - allows a Filipino spouse to contract a subsequent marriage in case the
divorce is validly obtained abroad by an alien spouse capacitating him or her to
remarry. The provision reads: ChanRoblesVirtualawlibrary

Art. 26. All marriages solemnized outside the Philippines in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be
valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36,
37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly

celebrated and a divorce is thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the Filipino spouse shall likewise
have capacity to remarry under Philippine law. (Emphasis supplied)
Under the above-highlighted paragraph, the law confers jurisdiction on Philippine courts
to extend the effect of a foreign divorce decree to a Filipino spouse without undergoing
trial to determine the validity of the dissolution of the marriage.26 chanrobleslaw

2|Page
In Corpuz v. Sto. Tomas,27 the Court had the occasion to rule that: ChanRoblesVirtualawlibrary

The starting point in any recognition of a foreign divorce judgment is the

acknowledgment that our courts do not take judicial notice of foreign judgments and
laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect
within its dominion to a judgment rendered by a tribunal of another country." This
means that the foreign judgment and its authenticity must be proven as facts
under our rules on evidence, together with the alien's applicable national law
to show the effect of the judgment on the alien himself or herself. The
recognition may be made in an action instituted specifically for the purpose or in
another action where a party invokes the foreign decree as an integral aspect of his
claim or defense.28 (Emphasis and underscoring supplied; citation omitted)
Thus, in Garcia v. Recio,29 it was pointed out that in order for a divorce obtained abroad
by the alien spouse to be recognized in our jurisdiction, it must be shown that the
divorce decree is valid according to the national law of the foreigner. Both the divorce
decree and the governing personal law of the alien spouse who obtained the divorce
must be proven.30 Since our courts do not take judicial notice of foreign laws and
judgment, our law on evidence requires that both the divorce decree and the national
law of the alien must be alleged and proven like any other fact.31 chanrobleslaw

Considering that the validity of the divorce decree between Doreen and Michiyuki, as
well as the existence of pertinent laws of Japan on the matter are essentially factual
that calls for a re-evaluation of the evidence presented before the RTC, the issue raised
in the instant appeal is obviously a question of fact that is beyond the ambit of a Rule
45 petition for review.

Well entrenched is the rule that this Court is not a trier of facts. The resolution of
factual issues is the function of the lower courts, whose findings on these matters are
received with respect and are in fact binding subject to certain exceptions.32 In this
regard, it is settled that appeals taken from judgments or final orders rendered by RTC
in the exercise of its original jurisdiction raising questions of fact or mixed questions of
fact and law should be brought to the Court of Appeals (CA) in accordance with Rule 41
of the Rules of Court.33
chanrobleslaw

Nonetheless, despite the procedural restrictions on Rule 45 appeals as above-adverted,

the Court may refer the case to the CA under paragraph 2, Section 6 of Rule 56 of the
Rules of Court, which provides: ChanRoblesVirtualawlibrary

SEC. 6. Disposition of improper appeal. - x x x

An appeal by certiorari taken to the Supreme Court from the Regional Trial Court
submitting issues of fact may be referred to the Court of Appeals for decision or
appropriate action. The determination of the Supreme Court on whether or not issues of
fact are involved shall be final.
This, notwithstanding the express provision under Section 5 (f) thereof that an appeal
likewise "may" be dismissed when there is error in the choice or mode of appeal.34 chanrobleslaw

Since the said Rules denote discretion on the part of the Court to either dismiss the
appeal or refer the case to the CA, the question of fact involved in the instant appeal
and substantial ends of justice warrant that the case be referred to the CA for further
appropriate proceedings. It bears to stress that procedural rules were intended to

3|Page
ensure proper administration of law and justice. The rules of procedure ought not to be
applied in a very rigid, technical sense, for they are adopted to help secure, not
override, substantial justice. A deviation from its rigid enforcement may thus be allowed
to attain its prime objective, for after all, the dispensation of justice is the core reason
for the existence of the courts.35
chanrobleslaw

WHEREFORE, in the interest of orderly procedure and substantial justice, the case is
hereby REFERRED to the Court of Appeals for appropriate action including the
reception of evidence to DETERMINE and RESOLVE the pertinent factual issues in
accordance with this Decision.

SO ORDERED.

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 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 163602               September 7, 2011

SPOUSES EULOGIA MANILA and RAMON MANILA, Petitioners,

vs.
SPOUSES EDERLINDA GALLARDO-MANZO and DANIEL MANZO, Respondents.

DECISION

VILLARAMA, JR., J.:

This resolves the petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision1 dated February 27, 2004 and Resolution2 dated May 14, 2004
of the Court of Appeals (CA) in CA-G.R. SP No. 49998 which granted the petition for annulment of
judgment filed by the respondents.

The controversy stemmed from an action for ejectment3 filed by the respondents, spouses Ederlinda
Gallardo-Manzo and Daniel Manzo, against the petitioners, spouses Ramon and Eulogia Manila,
before the Metropolitan Trial Court (MeTC) of Las Piñas City, Branch 79 (Civil Case No. 3537). The
facts as summarized by the said court are as follows:

On June 30, 1982, Ederlinda Gallardo leased two (2) parcels of land situated along Real St.,
Manuyo, Las Piñas, Metro Manila, to Eulogia Manila for a period of ten (10) years at a monthly
rental(s) of P2,000.00 for the first two years, and thereafter an increase of ten (10) percent every
after two years. They also agreed that the lessee shall have the option to buy the property within two
(2) years from the date of execution of the contract of lease at a fair market value of One Hundred
and Fifty Thousand Pesos (P150,000.00)

The contract of lease expired on July 1, 1992 but the lessee continued in possession of the property
despite a formal demand letter dated August 8, 1992, to vacate the same and pay the rental
arrearages. In a letter reply dated August 12, 1992, herein defendant claimed that no rental fee is
due because she allegedly became the owner of the property at the time she communicated to the
plaintiff her desire to exercise the option to buy the said property.

Their disagreement was later brought to the Barangay for conciliation but the parties failed to reach
a compromise, hence the present action.4

On July 14, 1993, the MeTC rendered its decision,5 the dispositive portion of which reads:

WHEREFORE, a judgment is rendered in favor of the plaintiffs ordering the defendants:

1) To vacate the subject parcels of land and surrender possession thereof upon the payment
by the plaintiff of one-half of the value of the building constructed by the lessee. Should the
lessor refuse to reimburse the aforesaid amount, the lessee shall have the option to exercise
her right under Article 1678 of the New Civil Code;

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 2) To pay rental arrearages up to July 1, 1992 in the amount of Two Hundred Twenty Eight
Thousand and Forty Four 80/100 Pesos (P228,044.80);

3) To pay, as reasonable compensation for their continued withholding of possession of the

subject lots, the sum of Three Thousand Two Hundred and Twenty One Pesos (P3,221.00)
every month, commencing July 2, 1992 up to such time that they finally yield possession
thereof to the plaintiffs, subject to an increase of ten percent (10%) after every two (2) years
from said date; and

4) To pay plaintiffs attorney’s fees in the sum of Five Thousand Pesos (P5,000.00)

No pronouncement as to costs.

SO ORDERED.6

Petitioners appealed to the Regional Trial Court (RTC) of Makati City, Branch 63 (Civil Case No. 93-
3733) which reversed the MeTC. The RTC found that petitioners have in fact exercised their option
to buy the leased property but the respondents refused to honor the same. It noted that respondents
even informed the petitioners about foreclosure proceedings on their property, whereupon the
petitioners tried to intervene by tendering rental payments but the respondents advised them to
withhold such payments until the appeal of respondents in the case they filed against the Rural Bank
of Bombon (Camarines Sur), Inc. (Civil Case No. 6062) is resolved. It further noted that respondents’
intention to sell the lot to petitioners is confirmed by the fact that the former allowed the latter to
construct a building of strong materials on the premises. The RTC thus decreed:

IN THE LIGHT OF THE FOREGOING, judgment is hereby rendered reversing the decision of the
lower court dated July 14, 1993 and ordering as follows:

1) That plaintiffs execute a deed of absolute sale over that parcel of land subject of the
Contract of Lease dated June 30, 1982 after full payment of defendants of the purchase
price of P150,000.00;

2) That plaintiffs pay the costs of suit.

SO ORDERED.7

Respondents filed a motion for reconsideration on December 23, 1994. In its Order dated March 24,
1995, the RTC denied the motion for having been filed beyond the fifteen (15)-day period
considering that respondents received a copy of the decision on December 7, 1994. 8 Consequently,
the November 18, 1994 decision of the RTC became final and executory. 9

On December 22, 1998, respondents filed a petition for annulment of the RTC decision in the CA.
Respondents assailed the RTC for ordering them to sell their property to petitioners arguing that said
court’s appellate jurisdiction in ejectment cases is limited to the determination of who is entitled to
the physical possession of real property and the only judgment it can render in favor of the
defendant is to recover his costs, which judgment is conclusive only on the issue of possession and
does not affect the ownership of the land. They contended that the sale of real property by one party
to another may be ordered by the RTC only in a case for specific performance falling under its
original exclusive jurisdiction, not in the exercise of its appellate jurisdiction in an ejectment case.
Respondents also alleged that the petition for annulment is the only remedy available to them

6|Page
because the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies
are no longer available through no fault on their part.

By Decision dated February 27, 2004, the CA granted the petition, annulled the November 18, 1994
RTC decision and reinstated the July 14, 1993 MeTC decision. On the issue of lack of jurisdiction
raised by the respondents, the CA ruled as follows:

It must be stressed that the main action before the Metropolitan Trial Court is one for ejectment
grounded on the expiration of the parties’ contract of lease. And said court, finding that petitioners
have a valid right to ask for the ejectment of private respondents, ordered the latter to vacate the
premises and to pay their rentals in arrears. To Our mind, what the respondent court should have
done in the exercise of its appellate jurisdiction, was to confine itself to the issue of whether or not
petitioners have a valid cause of action for ejectment against the private respondents.

Unfortunately, in the decision herein sought to be annulled, the respondent court went further than
what is required of it as an appellate court when it ordered the petitioners to sell their properties to
the private respondents. In a very real sense, the respondent court materially changed the nature of
petitioners’ cause of action by deciding the question of ownership even as the appealed case
involves only the issue of prior physical possession which, in every ejectment suit, is the only
question to be resolved. As it were, the respondent court converted the issue to one for specific
performance which falls under its original, not appellate jurisdiction. Sad to say, this cannot be done
by the respondent court in an appealed ejectment case because the essential criterion of appellate
jurisdiction is that it revises and corrects the proceedings in a cause already instituted and does not
create that cause (Marbury v. Madison, 1 Cranch (U.S.), 137, 172, 2 L. edition 60, cited in 15 Corpus
Juris 727).

It follows that the respondent Regional Trial Court clearly acted without jurisdiction when it ordered
the petitioners to sell their properties to the private respondents. The order to sell can be made only
by the respondent court in an action for specific performance under its exclusive original jurisdiction,
and not in the exercise of its appellate jurisdiction in an appealed ejectment suit, as in this case.
Worse, the relief granted by the same court was not even prayed for by the private respondents in
their Answer and position paper before the MTC, whereat they only asked for the dismissal of the
complaint filed against them.10 (Emphasis supplied.)

With the denial of their motion for reconsideration, petitioners filed the present petition raising the
following issues:

WHETHER THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN ANNULLING

THE JUDGMENT BY THE REGIONAL TRIAL COURT OF MAKATI CITY
NOTWITHSTANDING THE FINDING THAT THE ORDINARY REMEDIES OF NEW TRIAL,
APPEAL, PETITION FOR RELIEF OR OTHER APPROPRIATE REMEDIES WERE LOST
THROUGH THE FAULT OF THE RESPONDENTS

WHETHER THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN ANNULLING

THE JUDGMENT BY THE REGIONAL TRIAL COURT OF MAKATI CITY ON THE GROUND
OF "LACK OF JURISDICTION" WHEN IT HAS NOT BEEN SHOWN THAT THE REGIONAL
TRIAL COURT OF MAKATI CITY HAD NO JURISDICTION OVER THE PERSON OF THE
RESPONDENTS OR THE SUBJECT MATTER OF THE CLAIM11

7|Page
The petition is meritorious.

A petition for annulment of judgments or final orders of a Regional Trial Court in civil actions can only
be availed of where "the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of the petitioner." 12 It is a remedy granted only
under exceptional circumstances and such action is never resorted to as a substitute for a party’s
own neglect in not promptly availing of the ordinary or other appropriate remedies. 13 The only
grounds provided in Sec. 2, Rule 47 are extrinsic fraud and lack of jurisdiction.

In this case, respondents alleged that the loss of remedies against the RTC decision was attributable
to their former counsel’s late filing of their motion for reconsideration and failure to file any proper
petition to set aside the said decision. They claimed that they had been constantly following up the
status of the case with their counsel, Atty. Jose Atienza, who repeatedly assured them he was on
top of the situation and would even get angry if repeatedly asked about the case. Out of their long
and close relationship with Atty. Atienza and due regard for his poor health due to his numerous and
chronic illnesses which required frequent prolonged confinement at the hospital, respondents
likewise desisted from hiring the services of another lawyer to assist Atty. Atienza, until the latter’s
death on September 10, 1998. Thus, it was only on November 1998 that respondents engaged the
services of their new counsel who filed the petition for annulment of judgment in the CA.

We are not persuaded by respondents’ asseveration. They could have directly followed up the status
of their case with the RTC especially during the period of Atty. Atienza’s hospital confinement. As
party litigants, they should have constantly monitored the progress of their case. Having completely
entrusted their case to their former counsel and believing his word that everything is alright, they
have no one to blame but themselves when it turned out that their opportunity to appeal and other
remedies from the adverse ruling of the RTC could no longer be availed of due to their counsel’s
neglect. That respondents continued to rely on the services of their counsel notwithstanding his
chronic ailments that had him confined for long periods at the hospital is unthinkable. Such
negligence of counsel is binding on the client, especially when the latter offered no plausible
explanation for his own inaction. The Court has held that when a party retains the services of a
lawyer, he is bound by his counsel’s actions and decisions regarding the conduct of the case. This is
true especially where he does not complain against the manner his counsel handles the suit. 14 The
oft-repeated principle is that an action for annulment of judgment cannot and is not a substitute for
the lost remedy of appeal.15

In any event, the petition for annulment was based not on fraudulent assurances or negligent acts of
their counsel, but on lack of jurisdiction.

Petitioners assail the CA in holding that the RTC decision is void because it granted a relief
inconsistent with the nature of an ejectment suit and not even prayed for by the respondents in their
answer. They contend that whatever maybe questionable in the decision is a ground for assignment
of errors on appeal – or in certain cases, as ground for a special civil action for certiorari under Rule
65 – and not as ground for its annulment. On the other hand, respondents assert that the CA, being
a higher court, has the power to adopt, reverse or modify the findings of the RTC in this case. They
point out that the CA in the exercise of its sound discretion found the RTC’s findings unsupported by
the evidence on record which also indicated that the loss of ordinary remedies of appeal, new trial
and petition for review was not due to the fault of the respondents.

We agree with the petitioners.

Lack of jurisdiction as a ground for annulment of judgment refers to either lack of jurisdiction over the
person of the defending party or over the subject matter of the claim. 16 In a petition for annulment of

8|Page
judgment based on lack of jurisdiction, petitioner must show not merely an abuse of jurisdictional
discretion but an absolute lack of jurisdiction. Lack of jurisdiction means absence of or no
jurisdiction, that is, the court should not have taken cognizance of the petition because the law does
not vest it with jurisdiction over the subject matter. Jurisdiction over the nature of the action or
subject matter is conferred by law.17

There is no dispute that the RTC is vested with appellate jurisdiction over ejectment cases decided
by the MeTC, MTC or MCTC. We note that petitioners’ attack on the validity of the RTC decision
pertains to a relief erroneously granted on appeal, and beyond the scope of judgment provided in
Section 6 (now Section 17) of Rule 70.18 While the court in an ejectment case may delve on the issue
of ownership or possession de jure solely for the purpose of resolving the issue of possession de
facto, it has no jurisdiction to settle with finality the issue of ownership 19 and any pronouncement
made by it on the question of ownership is provisional in nature. 20 A judgment in a forcible entry or
detainer case disposes of no other issue than possession and establishes only who has the right of
possession, but by no means constitutes a bar to an action for determination of who has the right or
title of ownership.21 We have held that although it was proper for the RTC, on appeal in the ejectment
suit, to delve on the issue of ownership and receive evidence on possession de jure, it cannot
adjudicate with semblance of finality the ownership of the property to either party by ordering the
cancellation of the TCT.22

In this case, the RTC acted in excess of its jurisdiction in deciding the appeal of respondents when,
instead of simply dismissing the complaint and awarding any counterclaim for costs due to the
defendants (petitioners), it ordered the respondents-lessors to execute a deed of absolute sale in
favor of the petitioners-lessees, on the basis of its own interpretation of the Contract of Lease which
granted petitioners the option to buy the leased premises within a certain period (two years from
date of execution) and for a fixed price (₱150,000.00). 23 This cannot be done in an ejectment case
where the only issue for resolution is who between the parties is entitled to the physical possession
of the property.

Such erroneous grant of relief to the defendants on appeal, however, is but an exercise of
jurisdiction by the RTC. Jurisdiction is not the same as the exercise of jurisdiction. As distinguished
from the exercise of jurisdiction, jurisdiction is the authority to decide a cause, and not the decision
rendered therein.24 The ground for annulment of the decision is absence of, or no, jurisdiction; that is,
the court should not have taken cognizance of the petition because the law does not vest it with
jurisdiction over the subject matter.25

Thus, while respondents assailed the content of the RTC decision, they failed to show that the RTC
did not have the authority to decide the case on appeal. As we held in Ybañez v. Court of Appeals: 26

On the first issue, we feel that respondent court acted inadvertently when it set aside the RTC ruling
relative to the validity of the substituted service of summons over the persons of the petitioners in the
MTC level. We must not lose sight of the fact that what was filed before respondent court is an
action to annul the RTC judgment and not a petition for review. Annulment of judgment may either
be based on the ground that a judgment is void for want of jurisdiction or that the judgment was
obtained by extrinsic fraud. There is nothing in the records that could cogently show that the RTC
lacked jurisdiction. Chiefly, Section 22 of B.P. Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, vests upon the RTC the exercise of an "appellate jurisdiction over all
cases decided by the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts in their respective territorial jurisdictions." Clearly then, when the RTC took cognizance of
petitioners’ appeal from the adverse decision of the MTC in the ejectment suit, it (RTC) was
unquestionably exercising its appellate jurisdiction as mandated by law. Perforce, its decision may

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not be annulled on the basis of lack of jurisdiction as it has, beyond cavil, jurisdiction to decide the
appeal.27 (Emphasis supplied.)

The CA therefore erred in annulling the November 18, 1994 RTC decision on the ground of lack of
jurisdiction as said court had jurisdiction to take cognizance of petitioners’ appeal.1avvphi1

On the timeliness of the petition for annulment of judgment filed with the CA, Section 3, Rule 47 of
the Rules of Court provides that a petition for annulment of judgment based on extrinsic fraud must
be filed within four years from its discovery; and if based on lack of jurisdiction, before it is barred by
laches or estoppel. The principle of laches or "stale demands" ordains that the failure or neglect, for
an unreasonable and unexplained length of time, to do that which by exercising due diligence could
or should have been done earlier—negligence or omission to assert a right within a reasonable time,
warrants a presumption that the party entitled to assert it has abandoned it or declined to assert
it.28 There is no absolute rule as to what constitutes laches or staleness of demand; each case is to
be determined according to its particular circumstances. 29

Here, respondents’ failure to assail the RTC ruling in a petition for review or certiorari before the CA,
rendered the same final and executory. Having lost these remedies due to their lethargy for three
and a half years, they cannot now be permitted to assail anew the said ruling rendered by the RTC
in the exercise of its appellate jurisdiction. Their inaction and neglect to pursue available remedies to
set aside the RTC decision for such length of time, without any acceptable explanation other than
the word of a former counsel who already passed away, constitutes unreasonable delay warranting
the presumption that they have declined to assert their right over the leased premises which
continued to be in the possession of the petitioners. Clearly, respondents’ petition to annul the final
RTC decision is barred under the equitable doctrine of laches.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated February 27,
2004 and Resolution dated May 14, 2004 of the Court of Appeals in CA-G.R. SP No. 49998 are SET
ASIDE. The petition for annulment of judgment filed by herein respondents is DISMISSED.

No costs.

SO ORDERED.

10 | P a g e
 THIRD DIVISION

G.R. No. 200072, June 20, 2016

PHILIP YU, Petitioner, v. VIVECA LIM YU, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision1 dated September 30, 2011 and
Resolution2 dated January 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
111414 which granted the petition for the annulment of the Decision3 dated August 20,
2008 of the Regional Trial Court (RTC), Fourth Judicial Region, Branch 10, Balayan,
Batangas.

The factual antecedents are as follows.

Petitioner Philip Yu and respondent Viveca Lim Yu were married on November 18, 1984.
They had four children and maintained their conjugal home at Room 1603 Horizon
Condominium, Meralco Avenue, Pasig, Metro Manila. In 1993, however, Viveca left the
conjugal home with their four children and filed a Petition for Legal Separation against
Philip before the RTC of Pasig City, Branch 261, for repeated physical violence, grossly
abusive conduct against her and the children, sexual infidelity, and attempt on her life.
She prayed for permanent custody over the children, support, and the dissolution and
distribution of their conjugal partnership valued at approximately P5,000,000.00.4 chanrobleslaw

Philip denied the accusations against him claiming that it was Viveca who actually
attacked him a few times. He narrated that his marriage to Viveca was arranged
according to the Chinese tradition and that it was much later when he discovered
Viveca's excessively jealous, cynical, and insecure behaviour. He countered that since
she abandoned the family home, taking their four children away, she was not entitled
to support. She was, likewise, unqualified to become the administrator of their conjugal
funds, which had outstanding obligations. Thus, Philip prayed in his Counterclaim for
the declaration of nullity of their marriage due to Viveca's psychological incapacity,
rendering her incapable of complying with her marital obligations.5 chanrobleslaw

On April 24, 2007, however, Philip filed a Motion to Withdraw Counterclaim for
Declaration of Nullity of Marriage revealing that he no longer had the desire to have his
marriage declared void. Despite Viveca's fervent opposition, the Pasig RTC granted the
motion.6 chanrobleslaw

On July 1, 2009, the RTC of Pasig City rendered a Decision7 dismissing the Petition for
Legal Separation in the following wise: ChanRoblesVirtualawlibrary

From the facts obtaining in this case, the Court finds that the parties are
in pari delicto warranting a denial of this petition. Respondent's illicit relationship
with Linda Daet and his repeated verbal and physical abuses towards petitioner come

11 | P a g e
within the purview of pars. 8 and 1 of Art. 55 of the Family Code of the Philippines
whereas petitioner's unjustifiable abandonment bringing with her their children without
the knowledge and consent of respondent and her assaulting respondent with a 10-inch
knife are those contemplated in pars. 10 and 9 of the same code.

Notwithstanding the foregoing Court's findings, the same becomes moot with
the declaration of nullity of the marriage of the parties, on the ground of the
psychological incapacity of petitioner, Viveca Yu, pursuant to the Decision of
Branch 10, RTC of Balayan, Batangas, which attained its finality on October 13,
2008. Since the marriage of the parties was declared a nullity there is, therefore, no
legal basis to issue a decree of legal separation to the spouses whose marriage has
already been declared of no force and effect.

WHEREFORE, premises considered, this petition should be, as it is hereby DISMISSED,

for lack of merit.

SO ORDERED.8 chanroblesvirtuallawlibrary

Claiming to be completely unaware of the proceedings before the RTC of Balayan,

Batangas, nullifying her marriage with Philip on the ground of her psychological
incapacity, Viveca filed a Petition for Annulment of Judgment9 before the CA seeking to
annul the Decision dated August 20, 2008 of said court. According to Viveca,
jurisdiction over her person did not properly vest since she was not duly served with
Summons. She alleged that she was deprived of her right to due process when Philip
fraudulently declared that her address upon which she may be duly summoned was still
at their conjugal home, when he clearly knew that she had long left said address for the
United States of America. Viveca likewise maintained that had Philip complied with the
legal requirements for an effective service of summons by publication, she would have
been able to rightly participate in the proceedings before the Batangas court.

On September 30, 2011, the CA granted Viveca's petition ruling as follows: ChanRoblesVirtualawlibrary

The Petition for Declaration of Nullity of Marriage affecting the personal status of private

respondent is in the nature of an action in rem. This is so because the term "personal
status" includes family relations, particularly the relations between husband and wife.

With this premise in mind, it is beyond cavil that the court a quo was justified in
resorting to Summons by publication. Petitioner is a nonresident defendant who left the
Philippines with her children way back in 1997 and has now been living in the United
States of America. The court a quo validly acquired jurisdiction to hear and decide the
case given that as adumbrated, in a proceeding in rem, jurisdiction over the person of
the defendant is not a prerequisite to confer jurisdiction on the court, provided that the
court acquires jurisdiction over the res.

Still and all, there is more to this case than meets the eye. Private respondent
knew that petitioner left the conjugal home on account of their marital
difficulties. She temporarily resided at her parent's house in Greenhills, Mandaluyong,
Metro Manila. But during the pendency of the Legal Separation case, she lived in
Quezon City. This much was revealed by private respondent himself in
the Amended Answer with Counterclaim filed in the Legal Separation suit-
"10. After abandoning the conjugal abode on 24 August 1993, petitioner
resided at her parent's house in Richbelt Condominium, Annapolis Street,

12 | P a g e
Greenhills, Mandaluyong, Metro Manila, until she moved to her present
address in October 1993. x x x x
This knowledge notwithstanding, private respondent declared before the
court a quo that the "last known address" of petitioner was still her conjugal
abode at Unit 1603 Horizon Condominium, Mcralco Avenue, Ortigas, Pasig City.
While private respondent knew that it was well-nigh impossible for petitioner
to receive Summons and other court notices at their former conjugal home,
still, he supplied the aforesaid address.

We cannot turn a blind eye to the fact that private respondent moved for the
dismissal of his counterclaim for nullity of marriage in the Legal Separation
case in 2007 as he had by then had the sinister motive of filing the Petition for
Declaration of Nullity of Marriage before the court a quo. Private respondent
knew that if he breathed a word on the filing and pendency of the
latter Petition, petitioner would vigorously resist it as revealed by her
tenacious opposition in the proceedings before the RTC-Pasig.

The deceitful scheme employed by private respondent deprived petitioner of

her constitutional right to due process which ensued in her failure to
participate in the proceedings before the court a quo. To Our mind, this
compelling justification warrants the annulment of judgement. 10 chanroblesvirtuallawlibrary

In its Resolution dated January 5, 2012, the CA denied Philip's Motion for
Reconsideration finding no cogent and persuasive reason to revise or reverse its
Decision. Hence, this petition invoking the following grounds:
ChanRoblesVirtualawlibrary

I.

THE COURT OF APPEALS ERRED WHEN IT SET ASIDE THE FINAL AND EXECUTORY
DECISION OF THE COURT A QUO DESPITE ITS ACCURATE FINDINGS THAT THE COURT
A QUO PROPERLY ACQUIRED JURISDICTION OVER THE ACTION IN REM THROUGH
SUMMONS BY PUBLICATION.

II.

THE PUBLICATION OF THE ORDER OF THE COURT A QUO, SUMMONS, THE COMPLAINT
AS WELL AS THE DECISION RENDERED THEREIN IS NOTICE TO THE WHOLE WORLD
INCLUDING RESPONDENT. RESPONDENT WAS THEREFORE CONSTRUCTIVELY
NOTIFIED OF THE PROCEEDINGS AND WAS NOT DENIED DUE PROCESS HAVING BEEN
DULY NOTIFIED BY PUBLICATION.

III.

RESPONDENT HAS BEEN DOMICILED IN THE UNITED STATES OF AMERICA FOR MORE
THAN TEN (10) YEARS AND WHOSE ADDRESS IS UNKNOWN TO PETITIONER. AS FAR
AS PETITIONER IS CONCERNED, UNIT 1603 HORIZON CONDOMINIUM, MERALCO
AVENUE, PASIG CITY IS THE LAST KNOWN ADDRESS OF RESPONDENT, BEING THE
CONJUGAL HOME.

IV.

PETITIONER IS CURRENTLY NOT A RESIDENT OF THE CONJUGAL HOME.

13 | P a g e
 V.

THE OFFICE OF THE SOLICITOR GENERAL AND/OR THE OFFICE OF THE CITY
PROSECUTOR OF BALAYAN, BATANGAS, APPEARED AS COUNSEL FOR THE STATE AND
FULLY PROTECTED THE INTEREST OF THE STATE INCLUDING THE INTEREST OF
RESPONDENT.

VI.

PETITIONER CANNOT BE FAULTED FOR MOVING FOR THE WITHDRAWAL OF HIS

COUNTER-CLAIM FOR DECLARATION OF NULLITY OF MARRIAGE, WHICH IS ALLOWED
BY SECTION 2, RULE 17 OF THE NEW RULES OF COURT AS AMENDED, AND SAID
WITHDRAWAL WAS EVEN APPROVED BY THE RTC OF PASIG.

VII.

THE PETITION FOR ANNULMENT OF DECISION FILED BEFORE THE COURT OF APPEALS
WAS DEFECTIVE AND NOT IN ACCORDANCE WITH RULE 47 OF THE NEW RULES OF
COURT, AS AMENDED, FOR HAVING FAILED TO STATE AND ALLEGE THE DEFENSES
THAT RESPONDENT HAS AGAINST PETITIONER.

VIII.

EVEN ASSUMING ARGUENDO THAT THE DEFENSES THAT ARE AVAILABLE TO

RESPONDENT ARE THOSE THAT WERE PRESENTED IN THE LEGAL SEPARATION CASE
THAT WAS DISMISSED BY THE RTC OF PASIG CITY, SAID GROUNDS ONLY BOLSTER
THE FACT THAT THE DECISION DATED AUGUST 20, 2008 OF THE RTC OF BALAYAN,
BATANGAS, CORRECTLY NULLIFIED THE MARRIAGE DUE TO RESPONDENT'S
PSYCHOLOGICAL INCAPACITY.

IX.

THE COURT OF APPEALS DID NOT OBSERVE AND FOLLOW SECTIONS 6 AND 7 OF RULE
47 OF THE REVISED RULES OF COURT, AS AMENDED.
In essence, Philip questions the appellate court's judgment of setting aside the decision
of the Batangas RTC despite its own finding that said court validly acquired jurisdiction
when Summons was duly served on Viveca by publication. He maintains that since
service of summons was properly accomplished by publication thereof in a newspaper
of general circulation as well as its personal service on Viveca at her last known
address, it logically follows that any and all resolutions rendered by the trial court are
valid and binding on the parties. Thus, the decision of the Batangas court which
acquired jurisdiction over the res should be immutable as it is already final and
executory.11 chanrobleslaw

Philip also questions the appellate court's choice of supporting jurisprudence alleging
them to be inapplicable to the instant case. He asserts that the teachings in Spouses
Belen v. Judge Chavez,12Biaco v. Philippine Countryside Rural Bank,13 and Ancheta v.
Judge Ancheta14 fail to be instructive simply because they involve substituted service of
summons whereas the mode of service in this case is by publication. Philip further
asserts that said jurisprudential doctrines even teach us that in proceedings in

14 | P a g e
rem or quasi in rem, such as the case at hand, jurisdiction over the defendant is not a
prerequisite to confer jurisdiction on the court for as long as the court acquires
jurisdiction over the res. Thus, summons must be served upon the defendant not for
the purpose of vesting the court with jurisdiction but merely for satisfying the due
process requirements, which in this case was duly complied with when Viveca, who is a
non-resident, not found in the Philippines, was served with summons by publication.15 chanrobleslaw

Hence, Philip faults the CA in finding that due to his bad faith in maliciously supplying
the Batangas court with an erroneous address wherein Viveca may supposedly be
summoned, she was deprived of her constitutional right to due process, warranting the
annulment of the subject judgment. According to him, as far as he was concerned,
Viveca's last known address was their conjugal home. This is because the addresses
supplied in the proceedings of the Legal Separation case before the RTC of Pasig City
were merely temporary in nature.16 Philip recalled that when Viveca left their conjugal
abode on August 24, 1993, she temporarily stayed at her parents' house in Greenhills,
Mandaluyong, for less than two months then, thereafter, stayed at her temporary
residence at Domingo Street, Cubao, Quezon City, in October 1993. Considering that
said addresses were merely temporary, Philip claims that he should not be faulted for
using their conjugal abode as Viveca's "last known address." According to him, what is
mandated by the rules as the defendant's "last known address" is his or her last
known permanent address, and certainly not one of temporary nature.17 chanrobleslaw

The petition is bereft of merit.

Annulment of judgment is a recourse equitable in character, allowed only in exceptional

cases as where there is no available or other adequate remedy. Section 2, Rule 47 of
the 1997 Rules of Civil Procedure provides that judgments may be annulled only on
grounds of extrinsic fraud and lack of jurisdiction or denial of due process.18 The
objective of the remedy of annulment of judgment or final order is to undo or set aside
the judgment or final order, and thereby grant to the petitioner an opportunity to
prosecute his cause or to ventilate his defense. If the ground relied upon is lack of
jurisdiction, the entire proceedings are set aside without prejudice to the original action
being refiled in the proper court. If the judgment or final order or resolution is set aside
on the ground of extrinsic fraud, the CA may on motion order the trial court to try the
case as if a timely motion for new trial had been granted therein.19 chanrobleslaw

Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party
outside of the trial of the case, whereby the defeated party was prevented from
presenting fully his side of the case by fraud or deception practiced on him by the
prevailing party.20 Fraud is extrinsic where the unsuccessful party had been prevented
from exhibiting fully his case, by means of fraud or deception, as by keeping him away
from court, or by a false promise of a compromise; or where the defendant never had
knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an
attorney fraudulently or without authority assumes to represent a party and connives at
his defeat; these and similar cases which show that there has never been a real contest
in the trial or hearing of the case are reasons for which a new suit may be sustained to
set aside and annul the former judgment and open the case for a new and fair hearing.
Ultimately, the overriding consideration is that the fraudulent scheme of the prevailing
litigant prevented a party from having his day in court.21 chanrobleslaw

15 | P a g e
In the present case, We find that Viveca was completely prevented from participating in
the Declaration of Nullity case because of the fraudulent scheme employed by Philip
insofar as the service of summons is concerned.

Summons is a writ by which the defendant is notified of the action brought against him.
Through its service, the court acquires jurisdiction over his person.22 As a rule,
Philippine courts cannot try any case against a defendant who does not reside and is
not found in the Philippines because of the impossibility of acquiring jurisdiction over his
person unless he voluntarily appears in court. Section 15, Rule 14 of the Rules of Court,
however, enumerates the actions in rem or quasi in rem when Philippine courts have
jurisdiction to hear and decide the case because they have jurisdiction over the res, and
jurisdiction over the person of the non-resident defendant is not essential.23 Said
section provides:ChanRoblesVirtualawlibrary

Section 15. Extraterritorial service. — When the defendant does not reside and is
not found in the Philippines, and the action affects the personal status of the
plaintiff or relates to, or the subject of which is, property within the Philippines, in
which the defendant has or claims a lien or interest, actual or contingent, or in which
the relief demanded consists, wholly or in part, in excluding the defendant from any
interest therein, or the property of the defendant has been attached within the
Philippines, service may, by leave of court, be effected out of the Philippines by
personal service as under section 6; or by publication in a newspaper of general
circulation in such places and for such time as the court may order, in which
case a copy of the summons and order of the court shall be sent by registered
mail to the last known address of the defendant, or in any other manner the
court may deem sufficient. Any order granting such leave shall specify a reasonable
time, which shall not be less than sixty (60) days after notice, within which the
defendant must answer. (17a)
Thus, under Section 15 of Rule 14, a defendant who is a non-resident and is not found
in the country may be served with summons by extraterritorial service in four
instances: (1) when the action affects the personal status of the plaintiff; (2) when the
action relates to, or the subject of which is property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent; (3) when the relief
demanded consists, wholly or in part, in excluding the defendant from any interest in
property located in the Philippines; or (4) when the property of the defendant has been
attached within the Philippines.24 chanrobleslaw

In these instances, extraterritorial service of summons may be effected under any of

three modes: (1) by personal service out of the country, with leave of court; (2) by
publication and sending a copy of the summons and order of the court by registered
mail to the defendant's last known address, also with leave of court; or (3) by any
other means the judge may consider sufficient.25 cralawredchanrobleslaw

In the present case, it is undisputed that when Philip filed the Petition for Declaration of
Nullity of Marriage, an action which affects his personal status, Viveca was already
residing in the United States of America. Thus, extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court is the proper mode by which summons
may be served on Viveca, a non-resident defendant who is not found in the Philippines.
In compliance therewith, Philip claims that Viveca was duly served summons because:
(1) copies of the summons, complaint, and order of the Batangas court were published
in Tempo, a newspaper of general circulation on March 27, 2008 and April 3,

16 | P a g e
2008;26 and (2) the sheriff served copies of the summons, complaint, and order of the
Batangas court on Viveca at their conjugal home in Pasig City, her last known
address.27 Thus, he contends that the second mode of extraterritorial service of
summons mentioned above - by publication and sending a copy of the summons and
order of the court by registered mail to the defendant's last known address - was
sufficiently complied with. The Court finds, however, that such service of summons on
their conjugal home address cannot be deemed compliant with the requirements of the
rules and is even tantamount to deception warranting the annulment of the Batangas
court's judgment.

Philip fervently asserts the propriety of their conjugal home address as Viveca's "last
known address," well within the true meaning and intent of the rules. But as borne by
the records of the instant case, not only is he mistaken, factual considerations herein
belie his claims of good faith. First and foremost, it is undisputed that the parties herein
are also parties in a Legal Separation case, previously filed by Viveca way back in 1994.
There was, in said case, a disclosure of their basic personal information, which
customarily includes their respective local addresses, wherein they may be served with
court papers. In fact, as pointed out by the appellate court, Philip knew that Viveca had
already left their conjugal home and moved to a different local address for purposes of
the pendency of the Legal Separation case, as shown by his stipulation in his Amended
Answer with Counterclaim that "after abandoning the conjugal abode on 24 August
1993, petitioner resided at her parent's house in Richbelt Condominium, Annapolis
Street, Greenhills, Mandaluyong, Metro Manila, until she moved to her present address
in October 1993." Thus, Philip cannot be allowed to feign ignorance to the fact that
Viveca had already intentionally abandoned their conjugal abode and that of all the
addresses that Viveca resided at, their conjugal home in Horizon Condominium is her
least recent address. In fact, it may very well be considered as the address she is least
likely to be found considering the circumstances in which she left the same. Note that
from the very beginning of the Legal Separation case in 1994, all the way up until the
promulgation by the Pasig RTC of its decision thereon in 2009, there is no showing that
Viveca had ever received any document in relation to said case, nor is there any proof
that Philip had ever sent any pertinent file to Viveca, at the conjugal address. There is,
therefore, no reason for Philip to assume, in good faith, that said address is in truth and
in fact Viveca's "last known address" at which she may receive summons. His
contention that the rules require the defendant's "last known address" to be of a
permanent, and not of a temporary nature, has no basis in law or jurisprudence.

In addition, the Court is curious as to why Philip filed the instant Petition for Declaration
of Nullity of Marriage28 before the RTC of Batangas City on February 15, 2008 when less
than a year before filing the same, he had motioned the RTC of Pasig City on April 24,
2007 to withdraw his counterclaim for the same declaration of nullity of marriage.29 In
his petition before the Court, Philip explained that he withdrew his counterclaim in the
Legal Separation case in his "desire to explore the possibility of having a so-called
'universal settlement' of all the pending cases with respondent and her relatives for the
sake of his love for his four (4) children."30 Yet, in an apparent, direct contravention of
this so-called "desire," he filed an identical action which sought the same nullity of his
marriage with Viveca. Thus, while there may be no outright admission on Philip's part
as to a sinister motive, his inconsistent actions effectively negate his claims of good
faith.

17 | P a g e
It is interesting to note, moreover, that as pointed out by Viveca, Philip does not even
reside in Batangas, the city of the court wherein he filed his Petition for Declaration of
Nullity of Marriage. In a Certification31 issued by Ricardo V. Bautista, Barangay
Chairman of Poblacion 1, Calatagan, Batangas, it was categorically stated that "the
name Philip Yu is not a resident of Barangay Poblacion 1, Calatagan, Batangas." Section
4 of A.M. No. 02-11-10-SC, otherwise known as the Rule on Declaration of Absolute
Nullity of Void Marriages and Annulment of Voidable Marriages, which took effect on
March 15, 2003, provides: ChanRoblesVirtualawlibrary

Section 4. Venue. - The Petition shall be filed in the Family Court of the province
or city where the petitioner or the respondent has been residing for at least
six months prior to the date of filing. Or in the case of non-resident respondent,
where he may be found in the Philippines, at the election of the petitioner.32
chanroblesvirtuallawlibrary

It is, therefore, evident that not only did Philip contradict his previous Motion to
Withdraw his Counterclaim for the Declaration of Nullity of marriage, he even violated a
basic mandate of law so as to be able to file the same action before a different court in
a city he was not even a resident of.

Thus, while individually and in isolation, the aforementioned doubtful circumstances

may not instantly amount to extrinsic fraud, these circumstances, when viewed in
conjunction with each other, paint a deceitful picture which resulted in a violation of
Viveca's constitutional right to due process. True, the service of summons in this case is
not for the purpose of vesting the court with jurisdiction, but for the purpose of
complying with the requirements of fair play or due process. But because of Philip's
employment of deceptive means in the service of summons on Viveca, said purpose of
satisfying the due process requirements was never accomplished. To this Court, when
Philip declared before the Batangas court that Viveca's last known address was still
their conjugal home with full and undisputed knowledge that she had already
intentionally abandoned the same and had even established a more recent, local
residence herein evinces a clear lack of good faith. As a result, Viveca never had
knowledge of the filing of the Declaration of Nullity of Marriage suit, only finding out
about the same when the Pasig City RTC had promulgated its decision on the Legal
Separation case. It is clear, therefore, that because of the service of summons at the
erroneous address, Viveca was effectively prevented from participating in the
proceedings thereon.

In Acance v. Court of Appeals,33 where the extraterritorial service of summons on the

non-resident, US citizen, defendants therein were held to be defective due to the
absence of proof that the summons, complaint, and order of the court were duly served
at their last known correct address, the Court ruled that the failure to strictly comply
correctly with the requirements of the rules regarding the mailing of copies of the
summons and the order for its publication is a fatal defect in the service of
summons.34 Citing Dulap, et al. v. Court of Appeals, et al.,35 it elucidated as follows: ChanRoblesVirtualawlibrary

It is the duty of the court to require the fullest compliance with all the requirements of
the statute permitting service by publication. Where service is obtained by publication,
the entire proceeding should be closely scrutinized by the courts and a strict compliance
with every condition of law should be exacted. Otherwise great abuses may occur, and
the rights of persons and property may be made to depend upon the elastic conscience
of interested parties rather than the enlightened judgment of the court or judge.36 chanroblesvirtuallawlibrary

Indeed, due process requires that those with interest to the thing in litigation be
notified and given an opportunity to defend those interests.37 When defendants are

18 | P a g e
deprived of such opportunity to duly participate in, and even be informed of, the
proceedings, due to a deceitful scheme employed by the prevailing litigant, as in this
case, there exists a violation of their due process rights. Any judgment issued in
violation thereof necessarily suffers a fatal infirmity for courts, as guardians of
constitutional rights cannot be expected to deny persons their due process rights while
at the same time be considered as acting within their jurisdiction.38 This Court,
therefore, deems as proper the annulment of the Batangas court's judgment issued
without proper service of summons.

WHEREFORE, premises considered, the instant petition is DENIED. The assailed

Decision dated September 30, 2011 and Resolution dated January 5, 2012 of the Court
of Appeals in CA-G.R. SP No. 111414 are AFFIRMED.

SO ORDERED. chanRoblesvirtualLawlibrary

19 | P a g e
 THIRD DIVISION

G.R. No. 193397, January 25, 2017

ESTRELLA MEJIA-ESPINOZA AND NORMA MEJIA DELLOSA, Petitioners, v. NENA

A. CARIÑO, Respondent.

DECISION

JARDELEZA, J.:

Rule 47 of the Rules of Court allows an aggrieved party to file an action for annulment
of judgment or final orders under extraordinary circumstances. The question before us
in this petition for review on certiorari, which seeks to set aside the Decision1 dated
November 26, 2009 and Resolution2 dated August 3, 2010 of the Court of Appeals in
CA-G.R. CV No. 89905, is whether the same remedy may be used to annul court
processes pursuant to a final and executory judgment whose validity is not being
questioned. We hold that it cannot.

Petitioner Estrella Mejia-Espinoza (Espinoza) was the plaintiff in an action for ejectment
against respondent Nena A. Cariño (Nena) before the Municipal Trial Court of
Mangaldan, Pangasinan (MTC). The case was docketed as Civil Case No. 1420. The case
was consolidated with another ejectment case, docketed as Civil Case No. 1419,
involving Espinoza and one Alberto Cariño (Alberto) covering a different property.3 On
August 25, 1998, the MTC rendered a joint decision in favor of Espinoza. It ordered
Nena and Alberto to vacate the respective properties and to pay rents from time of
default, litigation expenses, and attorney's' fees.4 Nena and Alberto separately appealed
the joint decision to the Regional Trial Cout of Dagupan City, Branch 43 (RTC Branch
43), which reversed the decision only with respect to Civil Case No. 1420 and dismissed
the case against Nena for lack of cause of action.5 On Espinoza's petition for review, the
Court of Appeals Special Seventeenth Division6 (CA 17th Division) reversed the decision
of the RTC Branch 43 and affirmed the MTC decision.7 Nena sought to elevate the case
to us on certiorari, but we denied it as a result of Nena's failure to file her petition for
review within the extended period. An entry of judgment was issued on December 3,
2003.8

Espinoza filed a motion for issuance of a writ of execution before the MTC, which Nena
opposed.9 The MTC granted the motion on October 14, 200410 and subsequently issued
a writ of execution on March 10, 2005.11 Sheriff Vinez A. Hortaleza (Sheriff Hortaleza)
served the writ upon Nena on March 16, 2005.12 When Sheriff Hortaleza proceeded to
the property subject of the ejectment suit, he found out that Nena had voluntarily
vacated the place and turned over the padlock to one Gertrudes Taberna, Nena's
caretaker. Thus, Sheriff Hortaleza was able to peacefully turn over the propetiy to co-
petitioner Norma Mejia Dellosa (Dellosa), Espinoza's attorney-in-fact.13 Sheriff Hortaleza
then levied a separate commercial lot owned by Nena to cover the monetary awards for
rent, litigation expenses, and attorney's fees, and correspondingly issued a Notice of
Sale on Execution of Real Property14 scheduled on September 26, 2005.

20 | P a g e
On September 19, 2005, Nena filed a complaint captioned as "Annulment of Court's
Processes with prayer for the issuance of a Temporary Restraining Order, Preliminary
Injunction and/or Prohibition, and Damages" before the RTC of Dagupan City, which
was raffled to Branch 41 (RTC Branch 41).15 Nena argued that she was deprived of the
opportunity to ask for reconsideration of the order granting Espinoza's motion for
issuance of writ of execution because she was not furnished a copy of the order. She
claimed that Espinoza, through Dellosa, illegally caused the demolition, without a
special court order, of a one-story building which Nena allegedly constructed on the
land subject of the ejectment suit. Furthermore, she questioned the levy on her
commercial lot for being premature, as well as the computation of the judgment debt.16

In her Answer,17 Espinoza emphasized that the writ of execution was properly served
and received by Nena on March 16, 2005, and that Nena had already removed all her
personal belongings from the premises weeks before the service of the writ. With
respect to the demolition of the one-story building, Espinoza claimed that it was the
previous owners of the land, the Penullars, who built the structure. On the levy of the
commercial lot, Espinoza asserted that it was proper due to Nena's continued defiance
of a final and executory judgment.18

In its Decision,19 the RTC Branch 41 dismissed the complaint for lack of cause of action.
It opined that the issue on the alleged irregularity of the issuance of the writ of
execution was rendered moot by its implementation. It noted that Nena had already
voluntarily relinquished her possession of the property-including the building-before the
demolition. The RTC Branch 41 also found that the levy on Nena's commercial lot was
proper because Sheriff Hortaleza found no personal properties belonging to Nena. With
regard to the computation of the amount, the RTC ruled that the sheriff was guided by
the decision in the ejectment suit. Finally, the RTC Branch 41 held that Nena availed of
the wrong remedy; instead of a petition for annulment under Rule 47, Nena should
have filed a petition for relief from judgment under Rule 38.

On appeal, the Court of Appeals Fourth Division (CA 4th Division) reversed the RTC.20 It
held that Nena correctly filed the petition for annulment with the RTC of Dagupan City
in accordance with Section 10 of Rule 47. It brushed aside the RTC Branch 41's ruling
that Nena availed of the wrong remedy because according to the CA 4th Division,
regardless of the caption of the pleading, Nena had a cause of action accruing from the
violations of her rights. The CA 4th Division opined that because Nena did not receive a
copy of the order granting Espinoza's motion for issuance of writ of execution, it "did
not become final and executory insofar as [Nena] is concerned."21 The CA 4th Division
concluded that the writ of execution was "premature and without legal basis"22 and,
therefore, void.23 Next, the CA 4th Division ruled that the levy on Nena's commercial
property was void because the dispositive portion of the CA 17th Division Decision in the
ejectment suit did not mention any monetary award. Lastly, the CA 4th Division held
that Nena was entitled to damages because the one-story building was demolished
without the benefit of a writ of demolition as required by Section 10(d)24 of Rule
39.25 The CA 4th Division then remanded the case to the RTC for the determination of
the amount of damages that Nena is entitled to.26

After the CA 4th Division denied Espinoza's motion for reconsideration, Espinoza filed
this petition tor review on certiorari.27 She asserts that the issuance of a writ of

21 | P a g e
execution based on a final and executory decision is a ministerial duty of the MTC, and
that Nena was nonetheless given her day in court when she filed her opposition to the
motion for execution. She also faults the CA 4th Division for failing to properly
appreciate the dispositive portion of the CA 17th Division Decision in the ejectment suit.
In that case, the CA 17th Division affirmed the MTC Decision, which in turn ordered
Nena to vacate the premises and to pay rentals, litigation costs, and attorney's
fees.28 Espinoza likewise disputes the necessity for a writ of demolition because Section
10(d) of Rule 39 only applies to "improvements constructed or planted by the judgment
obligor or his agent." Espinoza maintains that since it was the Penullars who
constructed the building, the provision is inapplicable. In any case, Espinoza contends
that Nena's claim that she built the building was unsubstantiated.29 Finally, Espinoza
argues that Nena is estopped from questioning the validity of the writ of execution
because she already voluntarily surrendered possession of the property.30 In her
Comment,31 Nena reiterates the reasoning of the CA 4th Division that the court
processes were void.

II

A petition for annulment of judgment or final order under Rule 47 is an extraordinary

remedy that may be availed of only under certain exceptional circumstances. Under the
Rules, there are three requirements that must be satisfied before a Rule 47 petition can
prosper. First, the remedy is available only when the petitioner can no longer resort to
the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies through no fault of the petitioner.32 This means that a Rule 47 petition is a
remedy of last resort-it is not an alternative to the ordinary remedies under Rules 37,
38, 40, 41, 42, 43, and 45. Second, an action for annulment of judgment may be based
only on two grounds: extrinsic fraud and lack of jurisdiction.33Third, the action must be
filed within the temporal window allowed by the Rules. If based on extrinsic fraud, it
must be filed within four years from the discovery of the extrinsic fraud; if based on
lack of jurisdiction, must be brought before it is barred by laches or estoppel.34 There is
also a formal requisite that the petition be verified, and must allege with particularity
the facts and the law relied upon for annulment, as well as those supporting the
petitioner's good and substantial cause of action or defense, as the case may be.35

The averments of Nena's complaint a quo, however, do not make out an action for
annulment of judgment or final order. It was therefore inaccurate for both the CA
4th Division and the RTC Branch 41 to characterize it as a Rule 47 petition. While the
non-compliance with the requisites laid down in Rule 47 is glaring-there is neither any
averment in the complaint showing prima facie compliance with the aforementioned
requisites nor even a reference to Rule 47-the first thing the lower courts should have
considered is the subject of the complaint. Nena is challenging the MTC's order granting
the issuance of the writ of execution, the writ of execution itself, as well as the sheriffs
notice of levy and notice of sale on her real property. Clearly, these are not the
judgments or final orders contemplated by Rule 47. A final order or resolution is one
which is issued by a court which disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing else to be done but to
enforce by execution what has been detem1ined by the court.36 Rule 47 does not apply
to an action to annul the levy and sale at public auction. Neither does it apply to an
action to annul a writ of execution because a writ of execution is not a final order or
resolution, but is issued to carry out the mandate of the court in the enforcement of a

22 | P a g e
final order or of a judgment. It is a judicial process to enforce a final order or judgment
against the losing party.37

The proper remedy for Nena was to file a motion to nullify the writ of execution and
notices of levy and sale before the MTC, instead of instituting a new complaint before
the RTC.38 This is because the execution of a decision is merely incidental to the
jurisdiction already acquired by a trial court. As we explained in Deltaventures
Resources, Inc. v. Cabato:39
Jurisdiction once acquired is not lost upon the instance of the parties but continues until
the case is terminated. Whatever irregularities attended the issuance and
execution of the alias writ of execution should be referred to the same
administrative tribunal which rendered the decision. This is because any court
which issued a writ of execution has the inherent power, for the advancement of
justice, to correct errors of its ministerial officers and to control its own
processes.40 (Emphasis supplied; citations omitted.)
Ostensibly, Nena's complaint before the RTC may be viewed as one for prohibition and
damages insofar as it also prayed for the issuance of a permanent injunction and award
of damages. While a petition for prohibition may be an available remedy to assail the
actions of a sheriff who performs purely ministerial functions, in excess or without
jurisdiction,41 the filing of the aforementioned motion with the MTC is still a precondition
to such action. This is because the motion is the "plain, speedy, and adequate remedy
in the ordinary course of law."42

Therefore, while the RTC Branch 41 is partially correct in dismissing the complaint for
being the wrong remedy, it incorrectly identified a petition for relief under Rule 38 as
the proper recourse. The correct remedy is a motion to nullify court processes filed with
the MTC.

III

Even assuming that Nena availed of the appropriate remedy, her complaint is still
without merit.

Nena sought to annul the writ of execution because she did not receive a copy of the
MTC order granting the issuance of the writ of execution. Yet, she received a copy of
the writ without any protest and voluntarily vacated the premises and turned over
possession to Espinoza's representative. These actions evince Nena's recognition of and
acquiescence to, the writ of execution; she is therefore estopped from questioning its
validity. After all, she is fully aware of the finality of the decision in the ejectment case
and that execution of the decision is its logical consequence. "[W]hen a judgment has
been satisfied, it passes beyond review, satisfaction being the last act and the end of
the proceedings, and payment or satisfaction of the obligation thereby established
produces permanent and irrevocable discharge; hence, a judgment debtor who
acquiesces to and voluntarily complies with the judgment is estopped from taking an
appeal therefrom."43 Furthermore, as a result of Nena's voluntary compliance with the
writ, any issue arising from the issuance or enforcement of such writ is rendered moot.
Injunction is no longer available to question the transfer of possession to Espinoza, as
the act sought to be enjoined is already fait accompli.44

23 | P a g e
Nena's contention that her failure to receive a copy of the order deprived her of the
opportunity to file a motion for reconsideration is without legal basis, because she is not
entitled to file a motion for reconsideration in the first place. We have repeatedly held
that once a judgment becomes final, the prevailing party is entitled as a matter of right
to a writ of execution and its issuance is the trial court's ministerial duty.45 When a
prevailing party tiles a motion for execution of a final and executory judgment, it is not
mandatory for such party to serve a copy of the motion to the adverse party and to set
it for hearing. The absence of such advance notice to the judgment debtor does not
constitute an infringement of due process.46 Ergo, it follows that the opportunity to
move for reconsideration of an order granting execution is likewise not indispensable to
due process. This renders of little significance Nena's lack of opportunity to file a motion
for reconsideration. In fact, such motion for reconsideration may be considered as a
mere dilatory pleading, as it would serve no other purpose than to frustrate the
execution of a final judgment. In any case, the MTC actually gave Nena more than
enough opportunity to contest Espinoza's application for execution when it allowed her
to file her opposition to the motion for execution and heard the parties' arguments on
the matter.

We are convinced that Nena's complaint for annulment of court processes, filed six
months after she voluntarily complied with the writ of execution, was a mere
afterthought designed to evade the execution of a decision that has long attained
finality. Public policy dictates that once a judgment becomes final, executory, and
unappealable, the prevailing party should not be denied the fruits of his victory by some
subterfuge devised by the losing party. Unjustified delay in the enforcement of a
judgment sets at naught the role of courts in disposing justiciable controversies with
finality.47

The CA 4th Division ordered the remand of the case to determine the amount of
damages Nena is entitled to as a result of the demolition of the one-story building
without a special writ of demolition. It relied on Section 10(d) of Rule 39 which prohibits
a sheriff from destroying, demolishing or removing any improvements constructed or
planted by the judgment obligor without a special order of the court. We agree with the
view of the CA 4th Division that the special writ for the purpose of demolition is required
even if there is already a writ of execution, and that a demolition performed without a
special writ may serve as basis for an independent civil action for damages.48 However,
the CA 4th Division overlooked one crucial fact in this case: Nena admitted that she has
previously filed a complaint for damages in relation to the alleged illegal demolition. In
her Memorandum filed before the RTC Branch 41, she categorically stated that "the
illegal demolition of her building was already the subject of an earlier complaint for
damages that she asked her counsel to prepare."49 Thus, her complaint, insofar as it
sought the award of damages based on the demolition, is dismissible on the ground
of litis pendentia.

Moreover, as correctly pointed out by Espinoza, the CA 4th Division merely assumed

that Nena was the builder of the one-story building. Apart from the bare allegations in
her pleadings and her own testimony, the records are bereft of any evidentiary basis to
support her claim. There are two elementary rules in litigation that the CA 4th Division

24 | P a g e
failed to apply. First, the party who alleges must prove his case.50 Since Nena is seeking
reimbursement for the building she allegedly constructed, it was incumbent upon her to
prove by preponderance of evidence that the building was constructed at her own
expense, more so since Espinoza disputes Nena's ownership of the improvement.
However, Nena failed to present any tax declaration, receipt for construction materials,
or testimonies of the workers who physically built the structure which would tend to
substantiate her claim that the building was constructed at her expense. Second,
questions of fact must be resolved according to the evidence presented.51 The general
rule is that courts must base their factual findings on such relevant evidence formally
offered during trial. Recognized exceptions to this are matters which courts can take
judicial notice of,52 judicial admissions,53 and presumptions created by law or by the
Rules.54 Here, we find nothing under Philippine law that creates a presumption that
improvements on a land were made by the lessee (in this case, Nena). On the contrary,
Article 446 of the Civil Code provides that "all works x x x are presumed made by the
owner and at his expense, unless the contrary is proved." Therefore, in the absence of
such contrary evidence, the CA 4th Division cannot expediently assume that the building
was constructed by Nena.

Finally, one of the grounds relied upon by the CA 4th Division in annulling the writ of
execution was because it purportedly failed to conform to the judgment which is to be
executed. It pointed to the absence of any mention of monetary award in the
dispositive portion of the CA 17th Division's Decision in the ejectment suit that became
final and executory. We cannot sustain this unreasonably narrow reading of the fallo.

To recall, the MTC rendered a joint decision against Nena and Alberto in the
consolidated ejectment cases. The MTC ordered both to vacate the respective premises
and to pay the corresponding rentals, litigation costs, and attorney's fees.
The fallo reads:
ChanRoblesVirtualawlibrary

WHEREFORE, judgment is hereby rendered in: chanRoblesvirtualLawlibrary

1. Civil Case No. 1419 ordering defendant ALBERTO CARIÑO to vacate the premises in
question; to pay plaintiff ESTRELLA ESPINOZA Four Hundred Fifty (P450.00) Pesos a
month, as reasonable rental of said premises from the time of default until defendant
vacates the same; One Thousand (P1,000.00) Pesos as litigation expenses; Five
Thousand (P5,000.00) Pesos as attorney's fees in addition to costs of suit; and

2. Civil Case No. 1420 ordering defendant NENA CARIÑO to vacate the premises in
question; to pay plaintiff ESTRELLA ESPINOZA Four Hundred Fifty (P450.00) Pesos a
month, as reasonable rental of said premises from the time of default until defendant
vacates the same; One Thousand (P1,000.00) Pesos as litigation expenses; Five
Thousand (P5,000.00) Pesos as attorney's fees in addition to costs of suit.55 chanroblesvirtuallawlibrary

Nena and Albetio filed separate appeals with the RTC, which also consolidated the
cases. In its Joint Decision, the RTC Branch 43 reversed the MTC ruling in Civil Case No.
1420 and decreed that "the case against Nena Cari[ñ]o is hereby dismissed for lack of
cause of action." However, it upheld the ruling against Alberto, and ordered that he be
ejected from the premises and increased the amount payable as rentals, litigation
expenses, and attorney's fees.56

25 | P a g e
Espinoza then elevated the case to the CA 17th Division only with respect to the
dismissal of the case against Nena Albetio did not appeal the decision against him.
Eventually, the CA 17th Division reversed the RTC Branch 43 and affirmed the MTC
Decision. The fallo of the CA 17th Division Decision states:
ChanRoblesVirtualawlibrary

WHEREFORE, the petition for review is hereby GRANTED and the Joint Decision dated
January 2, 2001 of the court a quo is hereby REVERSED and SET ASIDE, only insofar as
it decreed the dismissal of the ejectment case against respondent Nena Cari[ñ]o.
Accordingly, the Joint Decision dated 25 August 1998 of the Municipal Trial Court of
Mangaldan, Pangasinan is hereby AFFIRMED insofar as it decreed the ejectment of
Nena Cari[ñ]o.57 chanroblesvirtuallawlibrary

After attaining finality, the CA 17th Division Decision became the basis of the writ of
execution issued by the MTC. In turn, the writ was the basis of Sheriff Hortaleza's
notice of levy and notice of sale. In her complaint a quo, Nena never questioned her
liability for rentals, attorney's fees, and litigation expenses in accordance with the MTC
Decision. She only questioned the allegedly erroneous computation of the judgment
debt. The CA 4th Division, however, held that "[n]owhere in the dispositive portion of
the Court of Appeals' Decision was it mentioned that an award is granted nor the
amount specified."58 This is blatant error on the part of the CA 4th Division. The CA
17th Division Decision, in no uncertain terms, affirmed the decision of the MTC. Hence,
the awards for rentals, litigation expenses, and attorney's fees stand. When an
appellate court affirms a trial court's decision without any modification, the execution
must necessarily conform to the terms and conditions of the trial court's fallo.59

It appears that the CA 4th Division interpreted the statement that "[the MTC decision] is
hereby AFFIRMED insofar as it decreed the ejectment of Nena Cari[ñ]o" to mean
that only the order to vacate is affirmed. This, however, is clearly not the intent of the
phrase. It must be noted that both the MTC and RTC Branch 43 Decisions were joint
decisions. Thus, to clarify that its decision will not have any effect on the judgment
against Alberto who did not appeal-the CA 17th Division deemed it appropriate to tailor
the dispositive portion as specifically applicable to Nena only. If the CA 17th Division
intended to do away with the monetary awards, then it would have explicitly stated
its modifications in the dispositive portion. Furthermore, there is nothing in the body
of the CA 17th Division's Decision that would tend to support the deletion of the awards
for rentals, litigation expenses, and attorney's fees.

WHEREFORE, the petition is GRANTED. The Decision dated November 26, 2009 and
Resolution dated August 3, 2010 of the Court of Appeals in CA-G.R. CV No. 89905
are REVERSED and SET ASlDE. The Decision dated April 10, 2007 of Branch 41 of the
Regional. Trial Court of Dagupan City in Civil Case No. 2005-0317-D is AFFIRMED.

SO ORDERED. chanroblesvirtuallawlibrary

26 | P a g e
 THIRD DIVISION

G.R. No. 178842, January 30, 2017

RENE H. IMPERIAL AND NIDSLAND RESOURCES AND DEVELOPMENT

CORPORATION, Petitioners, v. HON. EDGAR L. ARMES, PRESIDING JUDGE OF
BRANCH 4, REGIONAL TRIAL COURT, 5TH JUDICIAL REGION, LEGAZPI CITY
AND ALFONSO B. CRUZ, JR., Respondents.

G.R. No. 195509

ALFONSO B. CRUZ, Petitioner, v. RENE IMPERIAL AND NIDSLAND RESOURCES

AND DEVELOPMENT CORPORATION, Respondent.

DECISION

JARDELEZA, J.:

An action for the annulment of a void judgment, like the remedy of appeal, is a
statutory right. No party may invoke it unless a law expressly grants the right and
identifies the tribunal which has jurisdiction over this action. While a void judgment is
no judgment at all in legal contemplation, any action to challenge it must be done
through the correct remedy and filed before the appropriate tribunal. Procedural
remedies and rules of jurisdiction are in place in order to ensure that litigants are able
to employ the proper legal tools to obtain complete relief from the tribunal fully
equipped to grant it.

The Case

Before us are two (2) consolidated petitions for review on certiorari under Rule 45 of
the Rules of Court. The first petition, docketed as G.R. No. 178842, is filed by Rene H.
Imperial (Imperial) and NIDSLAND Resources and Development Corporation
(NIDSLAND) against Alfonso B. Cruz, Jr. (Cruz). It seeks the reversal of the resolutions
of the Court of Appeals (CA) dated March 6, 2007 and July 3, 2007, respectively. The
second petition, G.R. No. 195509, filed by Cruz against Imperial and NIDSLAND, seeks
the reversal of the Decision of the CA dated September 13, 2010.

The Facts

On September 24, 1993, Julian C. Napal (Napal) and Imperial entered into a
Memorandum of Agreement1 to organize a domestic corporation to be named
NIDSLAND. Under the Memorandum of Agreement, Napal and Imperial agreed to
engage in the real estate business. For his capital contribution to the corporation, Napal
undertook to convey to NIDSLAND a tract of land consisting of four lots (the Property)
covered by Transfer Certificate of Title (TCT) Nos. 37737, 37738, 37739 and 21026,
and to Imperial a two hectare portion of the Property situated in Taysan, Legazpi
City.2 Napal and Imperial intended to develop this land into a subdivision. Imperial, on
the other hand, as his contribution to NIDSLAND, committed to perform the following
obligations: to settle Napal's obligation to the Rural Bank of Ligao, Inc., which was

27 | P a g e
about to foreclose its mortgage on the Property; pay Napal's tax liabilities to the Bureau
of Internal Revenue (BIR) which encumbered with a tax lien the largest portion of the
Property; fund NIDSLAND's initial operating capital; and provide for Napal's personal
drawings in an amount not exceeding P1,200,000.3

While Imperial faithfully complied with his obligations under the Memorandum of
Agreement, Napal failed to convey to NIDSLAND a certain portion of the Property, in
particular Lot 15-C covered by TCT No. 21026 (the Subject Property).4 On July 24,
1996, Napal sold the Subject Property to Cruz as evidenced by a Deed of Absolute
Sale.5 While the Deed of Absolute Sale between Napal and Cruz bore the date July 24,
1996, the sale was registered in the Registry of Deeds of Legazpi City only on August
27, 1996.6

As Napal continued to refuse to convey the Subject Property to NIDSLAND under the
Memorandum of Agreement, Imperial filed on July 30, 1996, for himself and in
representation of NIDSLAND, a derivative suit (SEC Petition) before the Securities and
Exchange Commission (SEC).7 This was filed after the sale to Cruz but before its
registration. The case was docketed as SEC LEO Case No. 96-0004 (SEC Case).8 On the
same day, Imperial also filed a notice of lis pendens for the SEC Case with the Registry
of Deeds of Legazpi City. This was annotated on TCT No. 210269 as Entry No.
99956/99957.10

Since the annotation of the lis pendens occurred after the sale of the Subject Property
to Cruz but before its registration with the Registry of Deeds, the notice of lis
pendens was carried over to the new TCT No. 4393611 issued in Cruz's
name.12 Meanwhile, the SEC Case proceeded without the participation of Cruz who had
possession of the new TCT covering the Subject Property during the continuation of the
hearings.

On August 8, 1997 and during the pendency of the SEC Case, Imperial and NIDSLAND
filed an action for annulment of sale against Cruz (Annulment of Sale Action) before the
Regional Trial Court, Legazpi City (RTC Legazpi City). This was docketed as Civil Case
No. 9419.13 On August 14, 1997, the RTC Legazpi City dismissed the action and held
that it should have been filed in the original case where the decree of registration was
entered.14 Imperial and NIDSLAND elevated the case to the CA through an appeal.15 The
CA affirmed the RTC Legazpi City's ruling.16

On November 10, 1998, SEC Hearing Officer Santer G. Gonzales (SEC Hearing Officer
Gonzales) rendered a Decision17 in favor of Imperial and NIDSLAND (SEC Decision). The
Decision declared the Deed of Absolute Sale between Napal and Cruz void ab initio as
the SEC found that the sale was simulated and was intentionally made to appear to
have been perfected prior to the filing of the notice of lis pendens. Thus, the SEC
ordered the cancellation of the TCT in the name of Cruz. Further, the SEC directed
Napal to execute the proper deed of conveyance of the Subject Property in favor of
NIDSLAND. The SEC also mandated Napal to deliver the possession of the Subject
Property to NIDSLAND.18

Since Napal did not appeal the SEC Decision, it became final and executory and was
enforced on January 13, 1999. As ordered in the SEC Decision, a Deed of
Conveyance19 was issued on the same date, transferring the Subject Property to

28 | P a g e
NIDSLAND. TCT No. 43936 in the name of Cruz was cancelled and a new TCT No.
49730 was issued in the name of NIDSLAND on January 19, 1999.20

On February 18, 1999, Napal filed with the CA a Petition for Annulment of Judgment
under Rule 47 of the Rules of Court (Annulment of Judgment Action). This was
docketed as CA-G.R. SP No. 51258.21 Napal sought the nullification of the SEC Decision
as well as the orders and writs issued pursuant to it. Napal argued that the SEC has no
jurisdiction over the SEC Case as it did not involve any intra-corporate controversy. On
April 15, 1999, Cruz filed in the Annulment of Judgment Action a Motion to Join as
Party-Petitioner.22 In his motion, Cruz claimed that he is a transferee pendente lite of
the Subject Property.23

The CA promulgated a Decision24 on August 31, 1999 dismissing the Petition for
Annulment of Judgment. The CA explained that Rule 47 of the Rules of Court is not
available to annul the judgment of the SEC. According to the CA, the proper remedy in
this case is a special civil action for certiorari and prohibition. None of the parties
appealed the CA Decision. Thus, entry of judgment was made on November 16,
2000.25 cralawred

On January 22, 2001,26 Cruz filed a pleading denominated as a "Petition" before RTC

Legazpi City (RTC Petition),27 which sought to nullify the SEC Decision. This was
docketed as Civil Case No. SR-09 and raffled to Branch 4 of RTC Legazpi City.28 In the
RTC Petition, Cruz prayed for the following reliefs: ChanRoblesVirtualawlibrary

WHEREFORE, it is respectfully prayed that after hearing, judgment be rendered as

follows: chanRoblesvirtualLawlibrary

a) Declaring the Decision dated 10 November 1998 of respondent Gonzales to be null and
void insofar as it affects the property rights of petitioner to the Subject Property
b) Declaring the Deed of Conveyance dated January 13, 1999 as null and void for having
been issued pursuant to an invalid and void judgment
c) Declaring the cancellation of the TCT No. 43936 of petitioner, as well as the issuance of
TCT No. 49730 (and its derivatives TCT Nos. 50398, 50399, 50400 and 50401) of
respondent Nidsland, by respondent Register of Deeds of Legazpi City, to be invalid and
illegal.
d) Directing the respondent Register of Deeds of Legazpi City to duly cancel the TCT Nos.
50398, 50399, 50400 and 50401, and restore the status of TCT No. 43936 of plaintiff prior
to its cancellation, or otherwise reconvey and/or issue a new title to the Subject Property in
the name of plaintiff,
e) Ordering respondents to solidarily pay to petitioner the amount of P500,000.00, as and for
moral damages.
f) Ordering respondents to solidarily pay attorney's fees in the amount of P100,000.00,
appearance fees and costs of suit.29
Presiding Judge Gregorio A. Consulta, without issuing summons, dismissed the
Petition motu proprio.30 He justified his dismissal on the ground that regional trial courts
have no jurisdiction over the SEC and as such, an action assailing the decision of the
SEC should be brought before the CA. As his motion for reconsideration of the decision

29 | P a g e
was denied,31 Cruz elevated the case to the CA by way of a special civil action
for certiorari. This was docketed as CA G.R. SP No. 65720.32 In a Decision33 dated
October 28, 2002, the CA held that RTC Legazpi City acted with grave abuse of
discretion in dismissing the Petition, and therefore ordered that the case be remanded
to RTC Legazpi City to be given due course.34

In accordance with the Decision of the CA, the RTC Petition was redocketed as Civil
Case No. 10325 and was reraftled to Branch 3 of the RTC Legazpi City.35 However, even
before summons could be issued, Presiding Judge Henry B. Basilia issued an
Order36 dated April 15, 2004 dismissing the Petition. The Order stated that the RTC
Petition failed to comply with the reglementary period and other procedural
requirements under Rule 65 for the proper filing of a special civil action for certiorari.

However, upon Cruz's motion for reconsideration, Judge Basilia reversed his ruling in an
Order37 dated May 7, 2004. Thus, RTC Legazpi City summoned Imperial and NIDSLAND
on July 1, 2004.38 On July 30, 2004, Imperial and NIDSLAND filed a motion to
dismiss39 which was denied by Judge Basilla.40

Imperial and NIDSLAND then failed to file their answer and were declared in
default.41 Thus, Cruz was allowed to present evidence ex-parte. Judge Basilia eventually
set aside the order of default upon motion of Imperial and NIDSLAND.42 Judge Basilia
subsequently voluntarily inhibited himself, and the RTC Petition was reraffled to Branch
4 presided by Respondent Judge Edgar L. Armes (Respondent Judge Armes).43

After trial, the parties to the RTC Petition submitted their respective memoranda. In
Imperial and NIDSLAND's memorandum and supplemental memorandum, they again
sought the dismissal of the RTC Petition on the ground of lack of jurisdiction. Judge
Armes refused the dismissal.44

On August 22, 2006, Imperial and NIDSLAND filed an Omnibus Motion. This was
followed by a Supplemental Motion filed on September 7, 2006.45 In the two motions,
Imperial and NIDSLAND once again prayed for the dismissal of the RTC Petition and
raised, for the first time, the following grounds: ChanRoblesVirtualawlibrary

1. The failure of herein private respondent CRUZ, as petitioner in Civil Case

No. 10325, to state the required material dates in his initiatory Petition
necessary in order to determine compliance with the 60-days
reglementary period; chanrobleslaw

2. The failure of herein private respondent CRUZ, as petitioner in Civil Case

No. 10325, to show by any allegation in his initiatory Petition that there is
no appeal or any other plain, speedy and adequate remedy under the
ordinary course of law against the assailed decision in SEC LEO Case No.
96-0004 to warrant recourse to the extra-ordinary writ of certiorari; chanrobleslaw

3. The indisputable fact that the Petition in Civil Case No. 10325 was filed by
herein private respondent CRUZ far beyond the 60-days reglementary
period allowed under Section 4 of Rule 65 of the Rules of Court in view of
the admission by said respondent CRUZ in the Motion to Join as Party-
Petitioner that he filed in CA-G.R. SP No. 51258 wherein he expressly

30 | P a g e
 admitted having received a copy of the assailed decision in SEC LEO Case
No. 96-0004 in February, 1999; and

4. The decision in SEC LEO Case No. 96-0006, which has become final and
had been fully executed, is binding against herein private respondent
CRUZ, he being a successor-in-interest pendente lite to the title over the
Subject Property, of therein respondent Napal, pursuant to Section 19 of
Rule 3 of the Rules of Court.46

Respondent Judge Armes denied the Omnibus Motion and Supplemental Motion in an
Order dated September 21, 2006.47 According to the Order, the issues raised by
Imperial and NIDSLAND have already been settled by the CA in the certiorari case filed
by Cruz. The Order held that the CA ruled that the RTC Legazpi City has jurisdiction
over the case and even directed the latter to give due course to the RTC Petition.

Imperial and NIDSLAND filed a motion for reconsideration of this RTC Order on October
6, 2006.48 In this motion, Imperial and NIDSLAND argued that the ruling of the CA
pertained to an entirely different jurisdictional issue from that raised in their Omnibus
Motion and Supplemental Omnibus Motion.49 Respondent Judge Armes denied the
motion for reconsideration in an Order50 dated November 23, 2006. This Order
reiterated that the CA's directive that the RTC Legazpi City give due course to the RTC
Petition was unqualified and unconditional. Further, the Order explained that Imperial
and NIDSLAND's arguments had no merit for the following reasons: ChanRoblesVirtualawlibrary

1. This action is geared to declare the nullity of a void judgment. In the case
of Paluwagan ng Bayan Savings Bank vs. King, 172 SCRA 60, it was held
that an action to declare the nullity of a void judgment does not prescribe,
citing also Ang Lam vs. Rosillosa and Santiago, 86 Phil. 447-452. This
imprescriptibility of the action places it beyond the ambit of the 60-day
reglementary period under Sec. 4, Rule 65 of the Revised Rules of Court.

2. The petitioner in this case, not being a party in SEC LEO Case No. 96-
0004, was never officially notified of the assailed Decision, dated
November 10, 1998 by the deciding authority simply because there was
no basis therefor. The notice of the judgment, order or resolution, from
which the 60-day period shall be computed under Sec. 4, Rule 65 of the
Rules of Court, contemplates of an official notice from the deciding
authority and not mere informal information from other sources like what
happened in the case at bar[.] Since the official notice from the deciding
authority in SEC LEO Case No. 96-0004 was not and is not forthcoming
because there was no basis thereof, it follows that the 60-day period
aforesaid is not applicable to the case at bar.51

FIRST CONSOLIDATED CASE-G.R. No. 178842

Imperial and NIDSLAND then filed a Petition for Certiorari and Prohibition52 under Rule

65 of the Rules of Court before the CA. This petition assailed the validity of Respondent
Judge Armes' Orders dated September 21,2006 and November 23, 2006. This was
docketed as CA-G.R. SP No. 97823. The CA rendered a Resolution dated March 6,
200753 (First Assailed Resolution) dismissing Imperial and NIDSLAND's Petition

31 | P a g e
for Certiorari and Prohibition for lack of merit. Imperial and NIDSLAND filed a motion
for reconsideration which was denied by the CA in a Resolution dated July 3,
200754 (Second Assailed Resolution).

Hence, on August 2, 2007, Imperial and NIDSLAND filed this Petition for Review
on Certiorari55 under Rule 45 of the Rules of Court seeking a reversal of the two
assailed resolutions (First Petition). In their petition, Imperial and NIDSLAND argue that
the CA erred in affirming the RTC Decision on the RTC Petition. They argue that the CA
should have reversed the error of the RTC Legazpi City in allowing the filing of the RTC
Petition way beyond the 60-day period for the filing of a special civil action
for certiorari. They stress that the RTC Petition was filed three and a half years after the
finality of the SEC Decision and two years and three months from the time Cruz
received notice of its promulgation. They argue that neither the CA nor Cruz was able
to present any compelling reason for the relaxation of the reglementary period.

SECOND CONSOLIDATED CASE-G.R. No. 195509

While the First Petition was pending, RTC Legazpi City rendered a Decision56 dated
March 24, 2009 (RTC Main Decision). The RTC Legazpi City ruled that SEC Hearing
Officer Gonzales acted with grave abuse of discretion when he annulled the Deed of
Sale of the Subject Property between Napal and Cruz, ordered the cancellation of Cruz's
TCT, and directed Napal to execute a deed of conveyance in favor of NIDSLAND.
According to the RTC Main Decision, the CA has already definitively settled the issue of
RTC Legazpi City's jurisdiction over the case. It held that there is no merit in Imperial
and NIDSLAND's contention that the RTC Petition should have been dismissed for non-
compliance with the 60-day period for the filing of a special civil action for certiorari and
for failure of the RTC Petition to state the material dates. On the other hand, the RTC
Main Decision found that the SEC had no jurisdiction over Cruz and as such, in issuing
orders affecting his ownership over the Subject Property, it violated Cruz's right not to
be deprived of property without due process of law. Further, the RTC Main Decision
stated that RTC Legazpi City cannot settle the issue as to the rightful ownership of the
Subject Property in a special civil action for certiorari. The RTC Main Decision however
affirmed the award of damages in favor of Imperial and NIDSLAND in the SEC Case.
The dispositive portion held-
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
petitioner, as follows:

1. The Decision in SEC-LEO Case No. 96-0004, dated November 10, 1998,
signed by respondent Santer G. Gonzales, is hereby DECLARED NULL AND
VOID ONLY WITH RESPECT TO PARAGRAPHS 1 AND 2 OF THE
DISPOSITIVE PORTION THEREOF regarding the annulment of the Deed of
Sale of the subject property by Napal to petitioner Cruz, the cancellation
of the title issued pursuant to the said sale in the name of petitioner Cruz
and the directive to Napal to execute the deed of conveyance in favor of
respondent herein Nidsland as well as the delivery of possession of the
subject property to Nidsland and the designation of then Clerk of Court
Atty. Antonio C. Bagagnan to execute the proper deed of conveyance in
the event of refusal on the part of Napal.

32 | P a g e
 2. The following documents are hereby DECLARED NULL AND VOID: chanRoblesvirtualLawlibrary

a) Deed of Conveyance, dated [January] 13, 1999 issued by Atty. Antonio

C. Bagagnan, Clerk of Court MTCC, Legazpi City (Exh. "E" and Exh. "11")

b) TCT No. 49730 in the name of respondent Nidsland (Exh. "F" and Exh.
"12")

c) TCT No. 50398 in the name of respondent Nidsland (Exh. "F-1" and
Exh. "13")

d) TCT No. 50399 (Exh. "F-2" and Exh. "14")

e) TCT No. 50400 (Exh. "F-3" and Exh. "15")

f) TCT No. 50401 (Exh. "F-4" and Exh. "16")

3. Respondent Register of Deeds of Legazpi City Atty. Danilo B. Lorena is

hereby ordered to cancel the foregoing titles, to wit: TCT Nos. 49730;
50398; 50399; 50400; and 50401; chanrobleslaw

4. Respondent Lorena is hereby further ordered to recall or lift the

cancellation of TCT No. 43936 in the name of petitioner Alfonso Cruz, Jr.,
covering the subject property.

The parties' claims and counterclaims on their respective damages are

hereby ordered DISMISSED.

SO ORDERED.57 chanroblesvirtuallawlibrary

Aggrieved by the RTC Main Decision, Imperial and NIDSLAND filed before the CA an
appeal under Rule 41 of the Rules of Court. In a Decision58 dated September 13, 2010
(Second Assailed Decision), the CA reversed the RTC Decision. The dispositive portion
of the Assailed Decision states-
WHEREFORE, the assailed decision dated March 24, 2009, issued by the Regional Trial
Court, Branch -4, Legazpi City is hereby REVERSED and SET ASIDE; accordingly, Civil
Case No. 10325 is hereby DISMISSED.

No costs.

SO ORDERED.59 chanroblesvirtuallawlibrary

On March 24, 2011, Cruz filed a Petition for Review on Certiorari60 (Second Petition)
challenging the Second Assailed Decision. Cruz raised the following arguments: first,
Cruz claimed that he is the registered owner of the Subject Property. He was thus an
indispensable party to the SEC Case and as such, should have been impleaded. Since
the SEC Case was a personal action and he was never impleaded, Cruz argues that the
SEC never acquired jurisdiction over him. Thus, any decision cannot prejudice his
property rights over the Subject Property. Further, as an indispensable party, any
judgment obtained by Imperial and NIDSLAND in the SEC Case has no binding effect on
Cruz. Second, Cruz also claims that since the property was already registered in his
name, any deed of conveyance which Napal executed pursuant to the SEC Decision

33 | P a g e
transfers no rights since Napal no longer had rights over the Subject Property at the
time. Third, Cruz states that the CA erred when it held that he is already estopped from
challenging the cancellation of his TCT. He explains that he could not have participated
in the SEC Case to protect his rights. The SEC Case pertained to an intra corporate
dispute. As he was obviously not a stockholder of NIDSLAND, he had no basis to
intervene. He also emphasizes that Imperial and NIDSLAND never prayed for the
cancellation of his TCT in the SEC Case and thus, had no real reason to interfere until
SEC Hearing Officer Gonzales ruled that his TCT should be cancelled. Cruz also raises
the argument that he could not have filed a separate action to protect his rights over
the property since Imperial and NIDSLAND had already filed the Annulment of Sale
action against him for the annulment of the sale and cancellation of his TCT before RTC
Legazpi City. Cruz claims that he actively participated in this case which attained finality
only in 2003. According to Cruz, filing another case while this case was pending would
have amounted to multiplicity of suits.

We resolve the issues raised in these two consolidated cases.

The Issues

The core issue is whether RTC Legazpi City has jurisdiction to declare the nullity of the
Decision of the SEC. To resolve this issue, we once again clarify the apparent clash of
jurisdiction between the SEC and the ordinary courts in cases involving Presidential
Decree No. 902-A61 (PD 902-A).

The Ruling of the Court

We rule that that the RTC Petition should have been dismissed for lack of jurisdiction.
We likewise rule that the SEC Decision was issued with grave abuse of discretion
amounting to an excess of jurisdiction.

Nature of a void judgment

A void judgment is no judgment at all in legal contemplation. In Cañero v. University of

the Philippines62 we held that-
x x x A void judgment is not entitled to the respect accorded to a valid judgment, but
may be entirely disregarded or declared inoperative by any tribunal in which effect is
sought to be given to it. It has no legal or binding effect or efficacy for any purpose or
at any place. It cannot affect, impair or create rights. It is not entitled to enforcement
and is, ordinarily, no protection to those who seek to enforce. In other words, a void
judgment is regarded as a nullity, and the situation is the same as it would be if there
was no judgment. x x x63 chanroblesvirtuallawlibrary

A judgment rendered without jurisdiction is a void judgment. This want of jurisdiction

may pertain to lack of jurisdiction over the subject matter or over the person of one of
the parties.

A void judgment may also arise from the tribunal's act constituting grave abuse of
discretion amounting to lack or excess of jurisdiction. In Yu v. Judge Reyes-Carpio,64 we
explained-
The term "grave abuse of discretion" has a specific meaning. An act of a court or
tribunal can only be considered as with grave abuse of discretion when such act is done

34 | P a g e
in a "capricious or whimsical exercise of judgment as is equivalent to lack of
jurisdiction." x x x [T]he use of a petition for certiorari is restricted only to "truly
extraordinary cases wherein the act of the lower court or quasi-judicial body is wholly
void" x x x.65 chanroblesvirtuallawlibrary

In Guevarra v. Sandiganbayan, Fourth Division,66 we further explained-

x x x However, if the Sandiganbayan acts in excess or lack of jurisdiction, or with grave
abuse of discretion amounting to excess or lack of jurisdiction in dismissing a criminal
case, the dismissal is null and void. A tribunal acts without jurisdiction if it does not
have the legal power to determine the case; there is excess of jurisdiction where a
tribunal, being clothed with the power to determine the case, oversteps its authority as
determined by law. A void judgment or order has no legal and binding effect, force or
efficacy for any purpose. In contemplation of law, it is nonexistent. Such judgment or
order may be resisted in any action or proceeding whenever it is involved. x x x67 chanroblesvirtuallawlibrary

To give flesh to these doctrines, the Rules of Court, particularly the 1997 Revised Rules
on Civil Procedure, provides for a remedy that may be used to assail a void judgment
on the ground of lack of jurisdiction. Rule 47 of the Rules of Court states that an action
for the annulment of judgment may be filed before the CA to annul a void judgment of
regional trial courts even after it has become final and executory. If the ground invoked
is lack of jurisdiction, which we have explained as pertaining to both lack of jurisdiction
over the subject matter and over the person, the action for the annulment of the
judgment may be filed at any time for as long as estoppel has not yet set in. In cases
where a tribunal's action is tainted with grave abuse of discretion, Rule 65 of the Rules
of Court provides the remedy of a special civil action for certiorari to nullify the act.

Void judgments may also be collaterally attacked. A collateral attack is done through an
action which asks for a relief other than the declaration of the nullity of the judgment
but requires such a detennination if the issues raised are to be definitively settled.

Nature of the RTC Petition

The RTC Petition filed by Cruz has been treated by the CA and the parties as a special
civil action for certiorari. The RTC Petition, however, prays for the nullification of the
SEC Decision and thus purports to be an action for the annulment of a void judgment.
Ascertaining the true nature of the RTC Petition is crucial as it determines whether Cruz
properly invoked the correct remedy in assailing the SEC Decision.

The nature of an action is determined by the material allegations in the complaint and
the type of relief prayed for.68 We have examined the RTC Petition, and we rule that
contrary to the findings of the lower courts, it is an action for the annulment of
judgment on the ground of lack of jurisdiction. The meat of the RTC Petition's allegation
is that the SEC declared as void ab initio the sale between Napal and Cruz without
impleading Cruz in the proceedings. The SEC also had no power to order the transfer of
title over the Subject Property from Cruz to NIDSLAND because Cruz was never heard
in these proceedings. Cruz asserts that the SEC never acquired jurisdiction over his
person. Cruz thus prayed in the RTC Petition that the SEC Decision be declared null and
void.

The RTC Petition clearly captures the material allegations in a petition for annulment of
judgment on the ground of lack of jurisdiction over the person of one of the parties
under Rule 47 of the Rules of Court. In sharp contrast, the RTC Petition makes no

35 | P a g e
allegations that the SEC Decision was rendered with grave abuse of discretion. It
cannot be treated as a special civil action for certiorari under Rule 65.

The necessary question before us now is whether Cruz invoked the proper remedy.
There have been several attempts to use an action for annulment of judgment under
Rule 47 of the Rules of Court to set aside a void judgment of a quasi-judicial body. We
retrace our jurisprudence on the matter in order to ascertain if this remedy may be
properly invoked. A review of the relevant cases reveals two interrelated issues. First,
whether this remedy is available to set aside a void judgment of a quasi-judicial body;
and second, which tribunal has jurisdiction over it.

Jurisdiction over annulment of judgment of quasi-judicial bodies

Prior to Batas Pambansa Bilang 129 (BP 129),69 we had the chance to rule on the
question of jurisdiction over the annulment of judgment of quasi judicial bodies in BF
Northwest Homeowners Association, Inc. v. Intermediate Appellate Court.70 In that
case, we held that regional trial courts can annul the judgment of quasi-judicial bodies
which are of the same rank as courts of first instance. This ruling established two
things: first, an action for the annulment of judgment is a remedy available against a
void judgment of a quasi-judicial body. Second, regional trial courts had jurisdiction
whenever the quasi-judicial body involved is of inferior rank.

With the passage of BP 129, this doctrine appears to have been altered. Section 9(a) of
BP 129 expressly vested the CA with jurisdiction over annulment of judgments of
regional trial courts. Notably, it does not mention jurisdiction over annulment of
judgment of quasi-judicial bodies. In fact, quasi-judicial bodies are mentioned only in
Section 9(3)71 which provides for the CA's appellate jurisdiction over their judgments,
orders, resolutions and awards.

In 1997, the new rules of civil procedure took effect. These rules provided, for the first
time, a remedy called annulment of judgment on the ground of extrinsic fraud and lack
of jurisdiction. Rule 47, however, limits its application to regional trial courts and
municipal trial courts.

We had the opportunity to apply these relevant provisions in the 2000 case of Cole v.
Court of Appeals.72 In this case, we explained that the CA has no jurisdiction over a
petition for annulment of judgment under Rule 47 against a decision of the Housing and
Land Use Regulatory Board, a quasijudicial body. Rule 47 allows a resort to theCA only
in instances where the judgment challenged was rendered by regional trial courts. This
was also the import of our ruling in Elcee Farms, Inc. v. Semillano73 when we held that
the CA has no jurisdiction over the annulment of judgment of the National Labor
Relations Commission.

This was reiterated in the 2005 case Galang v. Court of Appeals74 which dealt with
decisions rendered by the SEC. In that case, we categorically ruled that the CA has no
jurisdiction over annulment of a void judgment rendered by the SEC since Rule 47 of
the Rules of Court clearly states that this jurisdiction only pertains to judgments
rendered by regional trial courts.

Springfield Development Corporation, Inc. v. Presiding Judge, RTC, Misamis Oriental,

36 | P a g e
Br. 40, Cagayan de Oro City75 summarized our foregoing rulings in determining whether
the CA has jurisdiction to annul a void judgment of the Department of Agrarian Reform
Adjudication Board (DARAB). This case was a significant development in the then
growing jurisprudence which all merely said that an action to annul a judgment of a
quasi-judicial body cannot be brought before the CA, and which did not categorically
state whether the action may be filed before any other court.

In Springfield, we explained that regional trial courts have no jurisdiction to annul

judgments of quasi-judicial bodies of equal rank. It then proceeded to state that the CA
also has no jurisdiction over such an action. Springfield emphasized that Section 9 ofBP
129 and Rule 47 of the Rules of Court both state that the CA has jurisdiction over
annulment of judgments of regional trial courts only. We ruled in this case that the
"silence of B.P. Blg. 129 on the jurisdiction of the CA to annul judgments or final orders
and resolutions of quasi-judicial bodies like the DARAB indicates its lack of such
authority."76 While this case explained that neither the regional trial courts nor the CA
possess jurisdiction over an action to annul the judgment of quasi-judicial bodies, it did
not categorically state that the remedy itself does not exist in the first place. Notably,
we disposed of this case by remanding the action filed before us-a special civil action
for prohibitionto the CA because the matter required a determination of facts which this
Court cannot do. We then held that the CA may rule upon the validity of the judgment
by noting that a void judgment may be collaterally attacked in a proceeding such as an
action for prohibition.77

The seeming confusion in the string of cases pertaining to the jurisdiction over petitions
for annulment of judgment of quasi-judicial bodies is clarified when these cases are
read in conjunction with Macalalag v. Ombudsman.78 While we repeated our consistent
ruling that Rule 47 of the Rules of Court only applies to judgments of regional trial
courts, Macalalag also explains that an action for the annulment of judgment is similar
in nature to an appeal-both are merely statutory. No right exists unless expressly
granted by law.79 In Macalalag, we implied that the key to determining whether this
remedy may be had and where such action may be filed is to ascertain whether there is
a law expressly allowing a resort to this action before a particular tribunal. This then
requires an examination of the laws and rules relevant to a specified quasi-judicial
body. While it is correct that both the regional trial courts and the CA cannot take
cognizance of a petition for annulment of judgment of a quasi-judicial body under Rule
47 of the Rules of Court, they may nevertheless do so, if a law categorically provides
for such a remedy and clearly provides them with jurisdiction.

Applying this to the present case, we rule that there is no law at the time pertinent to
this case, which allows the filing of a petition for annulment of judgment before the
regional trial courts and the CA to set aside a void judgment of the SEC on the basis of
lack of jurisdiction. We hasten to emphasize, however, that this pertains only to cases
filed prior to Republic Act No. 879980 (RA 8799) which transferred the jurisdiction over
intra-corporate disputes to regional trial courts designated as commercial courts. As to
the latter, Rule 47 clearly applies.

This leads to the conclusion that the RTC Petition is .not the proper remedy to assail the
SEC Decision. Since it is an action for the annulment of judgment, the RTC Petition
cannot prosper as we have already ruled that this remedy is not available in this
particular case.

37 | P a g e
However, the error in Cruz's RTC Petition does not automatically warrant a dismissal of
these proceedings. We rule that the SEC, in nullifying the sale between Napa! and Cruz
and in ordering the cancellation of Cruz's TCTs in favor of NIDSLAND, overstepped its
jurisdiction. The SEC Decision was rendered with grave abuse of discretion.

Grave Abuse of Discretion and the SEC's Jurisdiction

In 1976, PD 902-A vested the SEC with the quasi-judicial power over intra-corporate
disputes. While this jurisdiction was eventually transferred to regional trial courts
designated as special commercial courts by The Securities Regulation Code in 2000, the
SEC had the authority over intra corporate disputes at the time relevant to this case.

Through the years that the SEC had quasi-judicial power over intracorporate
controversies, this Court explained the delineation of jurisdiction between the trial
courts and the SEC. Our finding in this case that the SEC acted with grave abuse of
discretion is rooted on the proper understanding of the limits of the jurisdiction of the
SEC. We now review this Court's pertinent rulings on the jurisdiction of the SEC.

Under Section 5 of PD 902-A, the applicable law at the time the SEC Case was filed, the
SEC has original and exclusive jurisdiction to hear and decide cases involving the
following: ChanRoblesVirtualawlibrary

(a) Devices or schemes employed by or any acts, of the board of directors, business
associates, its officers or partnership, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or of the stockholder, partners,
members of associations or organizations registered with the Commission;
(b) Controversies ansmg out of intra-corporate or partnership relations, between and among
stockholders, members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the state
insofar as it concems their individual franchise or right to exist as such entity; and
(c) Controversies in the election or appointments of directors, trustees, officers or managers
of such corporations, partnerships or associations.
In Union Glass & Container Corporation v. Securities and Exchange Commission 81 we
said that "the law [PD 902-A] explicitly specified and delimited its jurisdiction to
matters intrinsically connected with the regulation of corporations, partnerships and
associations and those dealing with the internal affairs of such corporations,
partnerships or associations."82 We added that in order for the SEC to take cognizance
of a case, the controversy must pertain to any of the following relationships: (1)
between the corporation, partnership or association and the public; (2) between the
corporation, partnership or association and the state in so far as its franchise, permit or
license to operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates themselves.83

This is the relationship test, under which the existence of any of these relationships
vested the SEC with jurisdiction. In Abejo v. De la Cruz,84 we even declared that "an
intra-corporate controversy is one which arises between a stockholder and the

38 | P a g e
corporation. There is no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations."85

Later decisions of this Court, however, have moved away from this rather simplistic
determination of what constitutes an intra-corporate controversy. In the 1990 case
of Viray v. Court of Appeals,86 we held, thus:ChanRoblesVirtualawlibrary

The establishment of any of the relationships mentioned in Union will not necessarily

always confer jurisdiction over the dispute on the SEC to the exclusion of the regular
courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or relationship of the
parties but also the nature of the question that is the subject of their controversy.87
chanroblesvirtuallawlibrary

This is the controversy test. In Lozano v. De los Santos,88 we explained that the

controversy test requires that the dispute among the parties be intrinsically connected
with the regulation of the corporation, partnership or association.89 In Speed
Distribution Corp. v. Court of Appeals,90 we added that "[i]f the nature of the
controversy involves matters that are purely civil in character, necessarily, the case
does not involve an intra-corporate controversy."91

Taking all these holdings together, the issue of whether the SEC has the power to hear
and decide a case depends on two determinants: (1) the status or relationship of the
parties; and (2) the nature of the question that is the subject of their controversy.92

The application of these two tests has allowed for the proper delineation of the seeming
overlap in the jurisdiction of the SEC and the courts.

By way of illustration, in Union Glass we ruled that the action filed by the dissenting
stockholders against their corporation Pioneer Glass Manufacturing (Pioneer)
questioning its dacion en pago of Pioneer's plant in favor of Union Glass is an intra-
corporate dispute as it clearly pertained to the internal affairs of the corporation.
However, we held that the recovery of the possession of the plant should have been
filed with the trial court because the SEC possesses no jurisdiction over Union Glass
(the third-party purchaser) because it has no intra-corporate relationship with any of
the parties.

In Embassy Farms, Inc. v. Court of Appeals,93 the respondent, under a memorandum of

agreement, undertook to deliver certain parcels of land and shares of stock of Embassy
Farms, Inc. to the other party in exchange for the latter's payment of a certain amount.
When the other party failed to comply with his obligation to pay the amount, we held
that the conflict arising between them pertains to their contractual obligations under
the memorandum of agreement. It does not refer to the enforcement of rights and
obligations under the Corporation Code or the internal or intra-corporate affairs of the
corporation.

In Saura v. Saura, Jr.,94 certain stockholders sold a parcel of land to a corporation

without the consent of the other stockholders. When the latter filed an action for the
annulment of the sale against the purchasing corporation and the selling stockholders
before the trial court, the question of whether the case is an intra-corporate dispute
arose. Applying the two tests, we found that the case is not intra-corporate. The action

39 | P a g e
was ultimately directed against a third party even if the selling stockholders of the
corporation were also impleaded.

Further, in Intestate Estate of Alexander T. Ty v. Court of Appeals,95 where a

stockholder filed an action against the estate of another stockholder for the annulment
of a sale of shares which the former claims was simulated for lack of consideration, we
ruled that the jurisdiction properly belongs to the regional trial court. We explained that
"[t]he determination whether a contract is simulated or not is an issue that could be
resolved by applying pertinent provisions of the Civil Code, particularly those relative to
obligations and contracts. Disputes concerning the application of the Civil Code are
properly cognizable by courts of general jurisdiction."96

The development of both the concept and application of the relationship

test and controversy test reveals a growing emphasis on the delineated jurisdiction
between the SEC and ordinary courts. The delineation is based on the very purpose for
which the SEC was granted quasi-judicial powers in the first place. Under PD 902-A, the
SEC exercised jurisdiction over intra-corporate controversies precisely because it is a
highly-specialized administrative body in specialized corporate matters. It follows
therefore, that where the controversy does not call for the use of any technical
expertise, but the application of general laws, the case is cognizable by the ordinary
courts. In Macapalan v. Katalbas-Moscardon,97 we said-
It is true that the trend is towards vesting administrative bodies like the SEC with the
power to adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would also
relieve the regular courts of a substantial number of cases that would otherwise swell
their already clogged dockets. But as expedient as this policy may be, it should not
deprive the courts of justice of their power to decide ordinary cases in accordance with
the general laws that do not require any particular expertise or training to interpret and
apply. Otherwise, the creeping take-over by the administrative agencies of the judicial
power vested in the courts would render the judiciary virtually impotent in the
discharge of the duties assigned to it by the Constitution.98
chanroblesvirtuallawlibrary

Applying these principles to this case, we rule that the SEC does not have jurisdiction to
order the cancellation of the sale between Napal and Cruz. It also has no jurisdiction to
cancel Cruz's TCT and order its transfer to NIDSLAND.

To assail the validity of the sale, Imperial and NIDSLAND sought to prove that the sale
to Cruz was simulated. This involves the application of the law on sales. As we have
already held in Intestate Estate of Alexander T. Ty, the issue of whether a sale is
simulated falls within the jurisdiction of ordinary civil courts. It does not concern an
adjudication of the rights of Imperial, NIDSLAND and Napal under the Corporation Code
and the internal rules of the corporation. The resolution of these questions requires the
application of an entire gamut of laws that goes well beyond the expertise of the SEC.

Meanwhile, the question of whether Cruz's TCT should be cancelled goes into the proper
application of Presidential Decree No. 152999 and related doctrines. Specifically, there is
a need to take into consideration whether the SEC Petition is a collateral attack on the
certificate of title which goes against the well-established rule of indefeasibility. The
resolution of this question demands the application of our laws on land title and deeds,
a matter outside the ambit of the SEC's special competence.

40 | P a g e
Indeed, our jurisprudence has leaned in favor of recognizing the jurisdiction of quasi-
judicial bodies. However, this jurisdiction must always be viewed within the context of
its grant. The law vests quasi-judicial powers to administrative bodies over matters that
require their particular competence and specialized expertise. This grant of jurisdiction
is not and should not be justification to deprive courts of law of their jurisdiction as
determined by law and the Constitution. Courts of law are the instruments for the
adjudication of legal disputes. In a system of government where courts of law exist
alongside quasi-judicial bodies, the need to harmonize apparent conflicts in jurisdiction
require a determination of whether the matter to be resolved pertains to a general
question of law which belongs to ordinary courts or whether it refers to a highly
specialized question that can be better resolved by a quasi-judicial body in accordance
with its power vested by law.

In overstepping its jurisdiction, the SEC committed grave abuse of discretion.

Grave abuse of discretion is the capricious and whimsical exercise of judgment. It is the
exercise of a power in an arbitrary manner. It must be so patent or gross as to amount
to the evasion of a positive duty or to a virtual refusal to perform a duty enjoined or to
act at all in contemplation of law. In Air Transportation Office v. Court of Appeals,100 we
explained that grave abuse of discretion exists when the act is: (1) done contrary to the
Constitution, the law or jurisprudence; or (2) executed whimsically, capriciously or
arbitrarily out of malice, ill will or personal bias.101

In Thenamaris Philippines Inc. v. Court of Appeals,102 we ruled that grave abuse of

discretion exists where the assailed decision of the CA displayed patent errors. In Air
Transportation Office, the patent violation of the Rules of Court merited a finding that
there was grave abuse of discretion.

In this case, the SEC, in rendering the decision, disregarded established law and
jurisprudence on the jurisdiction of the SEC. Further, it adjudicated on the rights of
Cruz, cancelled the deed of sale, and took away his property without giving him the
opportunity to be heard. It is a breach of the basic requirements of due process.

Further, the incorrectness and impracticality of presenting these issues before the SEC
are highlighted by the reliefs granted by SEC Hearing Officer Gonzales in the SEC Case.
The SEC annulled the deed of sale between Napal and Cruz. This was based on
evidence presented during the SEC Hearing which consisted of Imperial's testimony that
the price that Cruz paid for the Subject Property was grossly below its value. While we
will not delve into the propriety of the SEC's factual findings, we note that there
appears nothing in the record, other than Imperial's statements, to support the
contention that the consideration was indeed grossly below the actual value of the
Subject Property. Furthermore, the SEC also found that the Deed of Sale was antedated
to make it appear that it took place prior to the annotation of the notice of lis pendens.
Again, this was based solely on Imperial's testimony during the SEC Hearing. We note
that there was nothing in the records, other than Imperial's bare statement, to
establish this.

The SEC Decision even went further and ordered the cancellation of Cruz's TCT. This did
not take into consideration the indefeasibility of a Torrens title. While this is not a
question that we seek to resolve in these consolidated cases, we emphasize that a

41 | P a g e
proper adjudication of this matter requires, at the very least, an analysis of the effect of
the notice of lis pendens, the rights of a transferee pendente lite, and the .propriety of
a collateral attack on a certificate of title. Clearly, the SEC is not the appropriate forum
to delve into these civil law concepts.

The SEC also does not possess the expertise to go into the reception of evidence and
the conduct of hearings geared for the purpose of resolving issues proper for a civil
action. The resolution of a civil action requires preponderance of evidence as a burden
of proof. On the other hand, cases before quasi-judicial bodies require only substantial
evidence. Hence, the propriety of annulling a sale and cancelling a Torrens title-which
are in the nature of a civil action-on the basis merely of substantial evidence
determined by an administrative body raises due process concerns.

Effects of a void judgment

When grave abuse of discretion taints a judgment, it becomes wholly void. It may be
challenged by direct action which has for its object the declaration of the nullity of the
judgment. It may also be set aside through a collateral attack.

Thus, in Guevarra, we allowed the filing of a motion for reconsideration even if it was
made beyond the reglementary 15-day period.

We based our ruling on the ground that the order challenged by the motion for
reconsideration was issued with grave abuse of discretion and is null and void. We
explained-
Such judgment or order may be resisted in any action or proceeding whenever it is
involved. It is not even necessary to take any steps to vacate or avoid a void judgment
or final order; it may simply be ignored.103 chanroblesvirtuallawlibrary

Our ruling in Gonzales v. Solid Cement Corporation104 is more unequivocal. In this case,
we found that the CA committed grave abuse of discretion amounting to lack or excess
of jurisdiction, therefore acting outside the contemplation of law. Hence, even when the
period to assail the CA decision had already lapsed, we ruled that it did not become
final and immutable. A void judgment never becomes final. We ruled thus-
The CA's actions outside its jurisdiction camiot produce legal effects and cannot likewise
be perpetuated by a simple reference to the principle of immutability of final judgment;
a void decision can never become final. "The only exceptions to the rule on the
immutability of final judgments are (1) the correction of clerical errors, (2) the so-
called nunc pro tunc entries which cause no prejudice to any party, and (3) void
judgments." x x x105 chanroblesvirtuallawlibrary

More, our ruling in Banco Español-Filipino v. Palanca106 on the effects of a void

judgment has reappeared consistently in jurisprudence touching upon the matter. In
this case, we said that a void judgment is "a lawless thing, which can be treated as an
outlaw and slain at sight, or ignored wherever and whenever it exhibits its head."107 In
concrete terms, this means that a void judgment creates no rights and imposes no
duties. Any act performed pursuant to it and any claim emanating from it have no legal
effect.108 Thus, in Heirs of Mayor Nemencio Galvez v. Court of Appeals,109 we nullified an
auction sale of a land as well as the resulting deed of sale and transfer certificate of title
as they were the offshoot of a writ of execution carried pursuant to a void judgment.

Hence, because the SEC Decision was issued with grave abuse of discretion and is

42 | P a g e
therefore void, all acts emanating from it have no force and effect. Thus, the Deed of
Conveyance issued pursuant to it has no legal effect.

Nevertheless, while the certificates of title issued in the name of NIDSLAND arose from
a void judgment, this Court cannot nullify them in these proceedings. The indefeasibility
of a Torrens title prevents us from doing so. Further, we are bound by rules on
jurisdiction and the nature of the proceedings before us.

Our Torrens system serves a very important purpose: As a general rule, a Torrens
certificate of title is conclusive proof of ownership. Thus, provided that the requirements
of law are met, a certificate of title under the Torrens system of registration is
indefeasible. The value of this rule finds real meaning when viewed in practical terms. A
registration under the Torrens system confirms that the person whose name appears as
owner of the land is indeed the true owner. Except for specific circumstances allowed by
law, a person who registers his or her ownership over a piece of land makes his or her
title indefeasible because the law does not allow any other person to attack or challenge
it. Because the title is indefeasible, third persons interested in the registered land can
simply look at the certificate of title and rely on the information stated in it. This creates
stability in our system of registration. This rule is so zealously protected that our laws
even prohibit a collateral attack of a void certificate of title.

This is the spirit that infused our ruling in Heirs of Spouses Benito Gavino and Juana
Euste v. Court of Appeals.110 In this case, we explained that the general rule that the
direct result of a void contract caimot be valid is inapplicable when the integrity of the
Torrens system is involved. Thus, a void certificate of title cannot be cancelled in a
proceeding not instituted for the purpose. We further said-
x x x The effect of such outright cancellation will be to impair public confidence in the
certificate of title. The sanctity of the Torrens system must be preserved; otherwise,
everyone dealing with the property registered under the system will have to inquire in
every instance as to whether the title had been regularly or irregularly issued, contrary
to the evident purpose of the law. Every person dealing with the registered land may
safely rely on the correctness of the certificate of title issued therefor and the law will in
no way oblige him to go behind the certificate to determine the condition of the
property.111 chanroblesvirtuallawlibrary

We cited this ruling in subsequent cases such as Rabaja Ranch Development

Corporation v. AFP Retirement and Separation Benefits System,112Spouses Chua v.
Soriano,113 and Republic v. Orfinada, Sr.114 The stability and reliability of the Torrens
system is so important that we cannot, in this case, undermine it for the sake of
expediency.

Hence, we cannot order the direct cancellation of the certificates of title issued to
NIDSLAND even if they are the direct result of a void decision. The nullity of the
certificates of title should be threshed out in a petition for cancellation of title brought
before the proper court.115

Moreover, there are procedural barriers that prevent us from determining the validity of
the certificates of title questioned in this case. First, we do not have jurisdiction over
the cancellation of certificates of title. Second, the nature of the action before us bars
us from going into the certificates of title themselves. We emphasize that this case is a
petition for review on certiorari of an action for annulment of judgment on the ground

43 | P a g e
of lack of jurisdiction. Our ruling is anchored on the lack of jurisdiction of the SEC to
annul the sale to Cruz and order the cancellation of the certificates of title. In this
Decision, we emphasized that the proper jurisdiction to annul the sale and to cancel the
certificates of title belongs to the regular courts, in particular, the regional trial courts.
We must thus also respect the rule on jurisdiction and exercise restraint in this case.
The proper action to cancel the void certificates of title must be brought before the
tribunal designated by law to possess jurisdiction over the matter. The proper party
may, however, use this Decision as it definitively settles that the certificates of title
issued to NIDSLAND arose out of a void judgment and as such, should have no force
and effect. This Decision is res judicata as to this question.

Further, we also cannot rule on the validity of the sale of the Subject Property to Cruz
as well as Napal's obligation to Imperial and NIDSLAND under the Memorandum of
Agreement. These matters require the presentation of facts before the proper forum
and through appropriate procedural remedies. While we endeavor to fully settle legal
disputes brought before us, we must also place premium on the importance of rules of
procedure. Rules of procedure serve to protect the interests of litigants who seek
redress before the courts. They ensure that litigants plead before the proper forum that
has the necessary expertise and legal tools to fully resolve a legal problem. They also
ensure that litigants employ the proper remedies that will allow them to successfully
obtain the appropriate relief. With this in mind, litigants must be more circumspect in
invoking the jurisdiction of the various tribunals and the multiple remedies available to
them.

WHEREFORE, the Court of Appeals' Resolution dated March 6, 2007 in the First
Consolidated Case is REVERSED and SET ASIDE. Further, we rule that Branch 4,
Regional Trial Court, Legazpi City has no jurisdiction over Cruz's Petition. Thus, the
Regional Trial Court's Decision dated March 24, 2009 is NULLIFIED.

The Court of Appeals' Decision dated September 13, 2010 in the Second Consolidated
Case is also REVERSED and SET ASIDE. We rule that the Securities and Exchange
Commission's Decision dated November 10, 1998 is VOID. Thus, the Deed of
Conveyance dated January 13, 1999 executed in compliance with this Decision
is NULLIFIED. The proper parties can file the appropriate petition for cancellation of
title in the trial court which has jurisdiction to nullify the certificates of title issued to
NIDSLAND by virtue of the void SEC Decision.

SO ORDERED. chanroblesvirtuallawlibrary

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 FIRST DIVISION

G.R. No. 193572, April 04, 2018

TSUNEISHI HEAVY INDUSTRIES (CEBU), INC., Petitioner, v. MIS MARITIME

CORPORATION, Respondent.

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Tsuneishi Heavy Industries (Cebu), Inc. (Tsuneishi) challenging the
Decision2 of the Court of Appeals (CA) in CA-G.R. CEB-SP No. 03956 dated October 7,
2009 and its Resolution3 dated August 26, 2010. The CA Decision reversed three Orders
of Branch 7 of the Regional Trial Court (RTC), Cebu City dated April 15, 2008, July 7,
2008, and December 11, 2008, respectively.4 The Resolution denied Tsuneishi's motion
for reconsideration.

Respondent MIS Maritime Corporation (MIS) contracted Tsuneishi to dry dock and
repair its vessel M/T MIS-1 through an Agreement dated March 22, 2006.5 On March
23, 2006, the vessel dry docked in Tsuneishi's shipyard. Tsuneishi rendered the
required services. However, about a month later and while the vessel was still dry
docked, Tsuneishi conducted an engine test on M/T MIS-1. The vessel's engine emitted
smoke. The parties eventually discovered that this was caused by a burnt crank journal.
The crankpin also showed hairline cracks due to defective lubrication or deterioration.
Tsuneishi insists that the damage was not its fault while MIS insists on the contrary.
Nevertheless, as an act of good will, Tsuneishi paid for the vessel's new engine
crankshaft, crankpin, and main bearings.6

Tsuneishi billed MIS the amount of US$318,571.50 for payment of its repair and dry
docking services. MIS refused to pay this amount. Instead, it demanded that Tsuneishi
pay US$471,462.60 as payment for the income that the vessel lost in the six months
that it was not operational and dry docked at Tsuneishi's shipyard. It also asked that its
claim be set off against the amount billed by Tsuneishi. MIS further insisted that after
the set off, Tsuneishi still had the obligation to pay it the amount of
US$152,891.10.7 Tsuneishi rejected MIS' demands. It delivered the vessel to MIS in
September 2006.8 On November 6, 2006, MIS signed an Agreement for Final
Price.9 However, despite repeated demands, MIS refused to pay Tsuneishi the amount
billed under their contract.

Tsuneishi claims that MIS also caused M/T White Cattleya, a vessel owned by Cattleya
Shipping Panama S.A. (Cattleya Shipping), to stop its payment for the services
Tsuneishi rendered for the repair and dry docking of the vessel.10

MIS argued that it lost revenues because of the engine damage in its vessel. This
damage occurred while the vessel was dry docked and being serviced at Tsuneishi's
yard. MIS insisted that since this arose out of Tsuneishi's negligence, it should pay for
MIS' lost income. Tsuneishi offered to pay 50% of the amount demanded but MIS

45 | P a g e
refused any partial payment.11

On April 10, 2008, Tsuneishi filed a complaint12 against MIS before the RTC. This
complaint stated that it is invoking the admiralty jurisdiction of the RTC to enforce a
maritime lien under Section 21 of the Ship Mortgage Decree of 197813 (Ship Mortgage
Decree). It also alleged as a cause of action MIS' unjustified refusal to pay the amount
it owes Tsuneishi under their contract. The complaint included a prayer for the issuance
of arrest order/writ of preliminary attachment. To support this prayer, the complaint
alleged that Section 21 of the Ship Mortgage Decree as well as Rule 57 of the Rules of
Court on attachment authorize the issuance of an order of arrest of vessel and/or writ
of preliminary attachment.14

In particular, Tsuneishi argued that Section 21 of the Ship Mortgage Decree provides
for a maritime lien in favor of any person who furnishes repair or provides use of a dry
dock for a vessel. Section 21 states that this may be enforced through an action in
rem.  Further, Tsuneishi and MIS' contract granted Tsuneishi the right to take
possession, control and custody of the vessel in case of default of payment. Paragraph
9 of this contract further states that Tsuneishi may dispose of the vessel and apply the
proceeds to the unpaid repair bill.15

Finally, Tsuneishi's complaint alleges that there are sufficient grounds for the issuance
of a writ of preliminary attachment. In particular, it claims that MIS is guilty of fraud in
the performance of its obligation. The complaint states:

40. x x x Under the factual milieu, it is wrongful for defendant MIS Maritime to take
undue advantage of an unfortunate occurrence by withholding payment of what is justly
due to plaintiff under law and contract. Defendant MIS Maritime knew or ought to have
known that its claim for lost revenues was unliquidated and could not be set-off or
legally compensated against the dry-docking and repair bill which was liquidated and
already fixed and acknowledged by the parties.

41. Defendant CATTLEYA SHIPPING'S actions and actuations in performing its obligation
were clearly fraudulent because, firstly, it had no business getting involved as far as the
M/T MIS-1 incident was concerned; secondly, no incident of any sort occurred when its
vessel M/T WHITE CATTLEYA was dry docked and repaired. It had no claim against the
plaintiff. Yet, it (defendant Cattleya Shipping) allowed itself to be used by defendant
MIS Maritime when it willfully and unlawfully stopped paying plaintiff, and conspired to
make good defendant MIS Maritime's threat to "withhold payment of any and all billings
that you (plaintiff) may have against our fleet of vessels which include those registered
under Cattleya Shipping Panama S.A. (MT White Cattleya) x x x.16

Tsuneishi also filed the Affidavit17 of its employee Lionel T. Bitera (Bitera Affidavit), in
accordance with the requirement for the issuance of a writ of preliminary attachment
under Rule 57 of the Rules of Court. The Bitera Affidavit stated that Tsuneishi
performed dry docking and repair services for M/T MIS-1 and M/T White Cattleya. It
also alleged that after Tsuneishi performed all the services required, MIS and Cattleya
refused to pay their obligation. According to the Bitera Affidavit, this refusal to pay
constitutes fraud because:

46 | P a g e
d. The breach of the obligation was willful. In the case of M/T MIS-1 no single
installment payment was made despite the fact that the vessel was accepted fully dry
docked and with a brand new engine crankshaft installed by the yard free of charge to
the Owner. MIS Maritime Corporation was blaming the yard for the damage sustained
by the engine crank shaft on 25 April 2006 when the engine was started in preparation
for sea trial. When the incident happened the drydocking had already been completed
and the vessel was already in anchorage position for sea trial under the management
and supervisory control of the Master and engineers of the vessel. Besides, the incident
was not due to the fault of the yard. It was eventually traced to dirty lube oil or
defective main engine lubricating oil which was the lookout and responsibility of the
vessel's engineers.

xxxx

e. The action taken by MIS Maritime Corporation in setting off its drydocking obligation
against their claim for alleged lost revenues was unilaterally done, and without legal
and factual basis for while, on one hand, the drydocking bill was for a fixed and agreed
amount, the claim of MIS Maritime for lost revenues, on the other hand, was not
liquidated as it was for a gross amount, x x x

f. Cattleya Shipping for its part had nothing to do with the dry docking of M/T MIS-1.
There was no incident whatsoever during the dry docking of its vessel M/T WHITE
CATTLEYA. In fact, after this vessel was satisfactorily dry docked and delivered to its
Owner (Cattleya Shipping) the latter started paying the monthly installments without
any complaint whatsoever, x x x18

The RTC issued a writ of preliminary attachment in an Order19 dated April 15, 2008
(First Order) without hearing. Consequently, MIS' condominium units located in the
financial district of Makati, cash deposits with various banks, charter hire receivables
from Shell amounting to P26.6 Million and MT MIS-1 were attached.20

MIS filed a motion to discharge the attachment.21 The RTC denied this motion in an
Order[22 dated July 7, 2008 (Second Order). MIS filed a motion for reconsideration
which the RTC also denied in an Order23 dated December 11, 2008 (Third Order).

MIS then filed a special civil action for certiorari24 before the CA assailing the three
Orders. MIS argued that the RTC acted with grave abuse of discretion when it ordered
the issuance of a preliminary writ of attachment and denied MIS' motion to discharge
and motion for reconsideration.

The CA ruled in favor of MIS. It reversed the three assailed Orders after finding that the
RTC acted with grave abuse of discretion in issuing the writ of preliminary attachment.25

According to the CA, the Bitera Affidavit lacked the required allegation that MIS has no
sufficient security for Tsuneishi's claim. In fact, the CA held that the evidence on record
shows that MIS has sufficient properties to cover the claim. It also relied on
jurisprudence stating that when an affidavit does not contain the allegations required
under the rules for the issuance of a writ of attachment and the court nevertheless
issues the writ, the RTC is deemed to have acted with grave abuse of discretion.

47 | P a g e
Consequently, the writ of preliminary attachment is fatally defective.26 The CA further
highlighted that a writ of preliminary attachment is a harsh and rigorous remedy. Thus,
the rules must be strictly construed. Courts have the duty to ensure that all the
requisites are complied with.27

The CA also found that the RTC ordered the issuance of the writ of preliminary
attachment despite Tsuneishi's failure to prove the presence of fraud. It held that the
bare and unsubstantiated allegation in the Bitera Affidavit that MIS willfully refused to
pay its obligation is not sufficient to establish prima facie fraud. The CA emphasized
that a debtor's mere inability to pay is not fraud. Moreover, Tsuneishi's allegations of
fraud were general. Thus, they failed to comply with the requirement in the Rules of
Court that in averments of fraud, the circumstances constituting it must be alleged with
particularity. The CA added that while notice and hearing are not required for the
issuance of a writ of preliminary attachment, it may become necessary in instances
where the applicant makes grave accusations based on grounds alleged in general
terms. The CA also found that Tsuneishi failed to comply with the requirement that the
affidavit must state that MIS has no other sufficient security to cover the amount of its
obligation.28

The CA disposed of the case, thus:

WHEREFORE, the petition is GRANTED. The three (3) Orders dated April 15, 2008,
July 7, 2008 and December 11, 2008, respectively, of the Regional Trial Court, Branch
7, Cebu City, in Civil Case No. CEB-34250, are ANNULLED and SET
ASIDE.29 (Emphasis in the original, citations omitted.)

Tsuneishi filed this petition for review on certiorari under Rule 45 of the Rules of Court
challenging the CA's ruling. Tsuneishi pleads that this case involves a novel question of
law. It argues that while Section 21 of the Ship Mortgage Decree grants it a maritime
lien, the law itself, unfortunately, does not provide for the procedure for its
enforcement. It posits that to give meaning to this maritime lien, this Court must rule
that the procedure for its enforcement is Rule 57 of the Rules of Court on the issuance
of the writ of preliminary attachment. Thus, it proposes that aside from the identified
grounds for the issuance of a writ of preliminary attachment in the Rules of Court, the
maritime character of this action should be considered as another basis to issue the
writ.30

To support its application for the issuance of a writ of preliminary attachment, Tsuneishi
also invokes a provision in its contract with MIS which states that:

In case of default, either in payment or in violation of the warranties stated in Section

11, by the Owner, the Owner hereby appoints the Contractor as its duly authorized
attorney in fact with full power and authority to take possession, control, and custody
of the said Subject Vessel and / or any of the Subject Vessel's accessories and
equipment, or other assets of the Owner, without resorting to court action; and that the
Owner hereby empowers the Contractor to take custody of the same until the obligation
of the Owner to the Contractor is fully paid and settled to the satisfaction of the
Contractor. x x x31 (Underscoring omitted.)

48 | P a g e
It insists that the writ of preliminary attachment must be issued so as to give effect to
this provision in the contract.

Tsuneishi also disputes the CA's finding that it Failed to show fraud in MIS' performance
of its obligation. It opines that MIS' failure to comply with its obligation does not arise
from a mere inability to pay. If that were the case, then the CA would be correct in
saying that MIS committed no fraud. However, MIS' breach of its obligation in this case
amounts to a gross unwillingness to pay amounting to fraud.32

Tsuneishi adds that the CA erred in holding that the RTC acted with grave abuse of
discretion when it failed to conduct a hearing prior to the issuance of the writ of
preliminary attachment. It insisted that the Rules of Court, as well as jurisprudence,
does not require a hearing prior to issuance.33

Finally, Tsuneishi disagrees with the ruling of the CA that it did not comply with the
requirements under the rules because the Bitera Affidavit did not state that MIS has no
other sufficient security. This was already stated in Tsuneishi's complaint filed before
the RTC. Thus, the rules should be applied liberally in favor of rendering justice.34

In its comment,35 MIS challenges Tsuneishi's argument that its petition raises a novel
question of law. According to MIS, the issue in this case is simple. A reading of
Tsuneishi's complaint shows that it prayed for the issuance of a writ of preliminary
attachment under Rule 57 of the Rules of Court or arrest of vessel to enforce its
maritime lien under the Ship Mortgage Decree.36 Thus, Tsuneishi knew from the start
that a remedy exists for the enforcement of its maritime lien—through an arrest of
vessel under the Ship Mortgage Decree. However, the RTC itself characterized the
complaint as a collection of sum of money with prayer for the issuance of a writ of
preliminary attachment. Thus, what it issued was a writ of preliminary attachment.
Unfortunately for Tsuneishi, the CA reversed the RTC because it found that the element
of fraud was not duly established. Thus, there was no ground for the issuance of a writ
of preliminary attachment.37

MIS insists that Tsuneishi is raising this alleged novel question of law for the first time
before this Court in an attempt to skirt the issue that it failed to sufficiently establish
that MIS acted with fraud in the performance of its obligation. MIS contends that fraud
cannot be inferred from a debtor's mere inability to pay. There is no distinction between
inability and a refusal to pay where the refusal is based on its claim that Tsuneishi
damaged its vessel. According to MIS, its vessel arrived at Tsuneishi's shipyard on its
own power. Its engine incurred damage while it was under Tsuneishi's custody. Thus,
Tsuneishi is presumed negligent.38

MIS further highlights that Tsuneishi completed the dry docking in April 2006. It was
during this time that the damage in the vessel's engine was discovered. The vessel was
turned over to MIS only in September 2006. Thus, it had lost a significant amount of
revenue during the period that it was off-hire. Because of this, it demanded payment
from Tsuneishi which the latter rejected.39

Hence, MIS argues that this is not a situation where, after Tsuneishi rendered services,

49 | P a g e
MIS simply absconded. MIS has the right to demand for the indemnification of its lost
revenue due to Tsuneishi's negligence.[40

MIS further adds that the CA correctly held that there was no statement in the Bitera
Affidavit that MIS had no adequate security to cover the amount being demanded by
Tsuneishi. Tsuneishi cannot validly argue that this allegation is found in its complaint
and that this should be deemed compliance with the requirement under Rule 57.41

Further, in its motion to discharge the preliminary attachment, MIS presented proof
that it has the financial capacity to pay any liability arising from Tsuneishi's claims. In
fact, there was an excessive levy of MIS' properties. This is proof in itself that MIS has
adequate security to cover Tsuneishi's claims. Finally, MIS agrees with the CA that the
RTC should have conducted a hearing. While it is true that a hearing is not required by
the Rules of Court, jurisprudence provides that a hearing is necessary where the
allegations in the complaint and the affidavit are mere general averments. Further,
where a motion to discharge directly contests the allegation in the complaint and
affidavit, the applicant has the burden of proving its claims of fraud.42

There are two central questions presented for the Court to resolve, namely: (1)
whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced
through a writ of preliminary attachment under Rule 57 of the Rules of Court; and (2)
whether the CA correctly ruled that Tsuneishi failed to comply with the requirements for
the issuance of a writ of preliminary injunction.

We deny the petition.

We begin by classifying the legal concepts of lien, maritime lien and the provisional
remedy of preliminary attachment.

A lien is a "legal claim or charge on property, either real or personal, as a collateral or

security for the payment of some debt or obligation."43 It attaches to a property by
operation of law and once attached, it follows the property until it is discharged. What it
does is to give the party in whose favor the lien exists the right to have a debt satisfied
out of a particular thing. It is a legal claim or charge on the property which functions as
a collateral or security for the payment of the obligation.44

Section 21 of the Ship Mortgage Decree establishes a lien. It states:

Sec. 21. Maritime Lien for Necessaries; Persons entitled to such Lien. – Any person
furnishing repairs, supplies, towage, use of dry dock or marine railway, or other
necessaries to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem  and it shall be necessary to allege or
prove that credit was given to the vessel.

In practical terms, this means that the holder of the lien has the right to bring an action
to seek the sale of the vessel and the application of the proceeds of this sale to the

50 | P a g e
outstanding obligation. Through this lien, a person who furnishes repair, supplies,
towage, use of dry dock or marine railway, or other necessaries to any vessel, in
accordance with the requirements under Section 21, is able to obtain security for the
payment of the obligation to him.

A party who has a lien in his or her favor has a remedy in law to hold the property
liable for the payment of the obligation. A lienholder has the remedy of filing an action
in court for the enforcement of the lien. In such action, a lienholder must establish that
the obligation and the corresponding lien exist before he or she can demand that the
property subject to the lien be sold for the payment of the obligation. Thus, a lien
functions as a form of security for an obligation.

Liens, as in the case of a maritime lien, arise in accordance with the provision of
particular laws providing for their creation, such as the Ship Mortgage Decree which
clearly states that certain persons who provide services or materials can possess a lien
over a vessel. The Rules of Court also provide for a provisional remedy which effectively
operates as a lien. This is found in Rule 57 which governs the procedure for the
issuance of a writ of preliminary attachment.

A writ of preliminary attachment is a provisional remedy issued by a court where an

action is pending. In simple terms, a writ of preliminary attachment allows the levy of a
property which shall then be held by the sheriff. This property will stand as security for
the satisfaction of the judgment that the court may render in favor of the attaching
party. In Republic v. Mega Pacific eSolutions (Republic),45 we explained that the
purpose of a writ of preliminary attachment is twofold:

First, it seizes upon property of an alleged debtor in advance of final judgment and
holds it subject to appropriation, thereby preventing the loss or dissipation of the
property through fraud or other means. Second,  it subjects the property of the debtor
to the payment of a creditor's claim, in those cases in which personal service upon the
debtor cannot be obtained. This remedy is meant to secure a contingent lien on
the defendant's property until the plaintiff can, by appropriate proceedings,
obtain a judgment and have the property applied to its satisfaction, or to make
some provision for unsecured debts in cases in which the means of
satisfaction thereof arc liable to be removed beyond the jurisdiction, or
improperly disposed of or concealed, or otherwise placed beyond the reach of
creditors.46 (Citations omitted, emphasis supplied. Italics in the original.)

As we said, a writ of preliminary attachment effectively functions as a lien. This is

crucial to resolving Tsuneishi's alleged novel question of law in this case. Tsuneishi is
correct that the Ship Mortgage Decree does not provide for the specific procedure
through which a maritime lien can be enforced. Its error is in insisting that a maritime
lien can only be operationalized by granting a writ of preliminary attachment under Rule
57 of the Rules of Court. Tsuneishi argues that the existence of a maritime lien should
be considered as another ground for the issuance of a writ of preliminary attachment
under the Rules of Court.

Tsuneishi's argument is rooted on a faulty understanding of a lien and a writ of

preliminary attachment. As we said, a maritime lien exists in accordance with the

51 | P a g e
provision of the Ship Mortgage Decree. It is enforced by filing a proceeding in court.
When a maritime lien exists, this means that the party in whose favor the lien was
established may ask the court to enforce it by ordering the sale of the subject
property and using the proceeds to settle the obligation.

On the other hand, a writ of preliminary attachment is issued precisely to create

a lien. When a party moves for its issuance, the party is effectively asking the court to
attach a property and hold it liable for any judgment that the court may render in his or
her favor. This is similar to what a lien does. It functions as a security for the payment
of an obligation. In Quasha Asperilla Ancheta Valmonte Peña & Marcos v. Juan,47 we
held:

An attachment proceeding is for the purpose of creating a lien on the property to serve
as security for the payment of the creditors' claim. Hence, where a lien already exists,
as in this case a maritime lien, the same is already equivalent to an attachment. x x x48

To be clear, we repeat that when a lien already exists, this is already equivalent to an
attachment. This is where Tsuneishi's argument fails. Clearly, because it claims a
maritime lien in accordance with the Ship Mortgage Decree, all Tsuneishi had to do is to
file a proper action in court for its enforcement. The issuance of a writ of preliminary
attachment on the pretext that it is the only means to enforce a maritime lien is
superfluous. The reason that the Ship Mortgage Decree does not provide for a detailed
procedure for the enforcement of a maritime lien is because it is not necessary. Section
21 already provides for the simple procedure—file an action in rem  before the court.

To our mind, this alleged novel question of law is a mere device to remedy the error
committed by Tsuneishi in the proceedings before the trial court regarding the issuance
of a writ of preliminary attachment. We note that the attachment before the trial court
extended to other properties other than the lien itself, such as bank accounts and real
property. Clearly, what was prayed for in the proceedings below was not an attachment
for the enforcement of a maritime lien but an attachment, plain and simple.

II

Tsuneishi's underlying difficulty is whether it succeeded in proving that it complied with

the requirements lor the issuance of a writ of preliminary attachment. This is the only
true question before us. In particular, we must determine whether the Bitera Affidavit
stated that MIS lacked sufficient properties to cover the obligation and whether MIS
acted with fraud in refusing to pay.

At the onset, we note that these questions dwell on whether there was sufficient
evidence to prove that Tsuneishi complied with the requirements for the issuance of a
writ of preliminary attachment. Sufficiency of evidence is a question of fact which this
Court cannot review in a Rule 45 petition. We are not a trier of fact.

Nevertheless, we have examined the record before us and we agree with the factual
findings of the CA.

The record clearly shows that the Bitera Affidavit does not state that MIS has no other

52 | P a g e
sufficient security for the claim sought to be enforced. This is a requirement under
Section 3, Rule 57 of the Rules of Court. We cannot agree with Tsuneishi's insistence
that this allegation need not be stated in the affidavit since it was already found in the
complaint. The rules are clear and unequivocal. There is no basis for Tsuneishi's
position. Nor is it entitled to the liberal application of the rules. Not only has Tsuneishi
failed to justify its omission to include this allegation, the facts also do not warrant the
setting aside of technical rules. Further, rules governing the issuance of a writ of
preliminary attachment are strictly construed.

We also agree with the CA's factual finding that MIS did not act with fraud in refusing to
pay the obligation. We emphasize that when fraud is invoked as a ground for the
issuance of a writ of preliminary attachment under Rule 57 of the Rules of Court, there
must be evidence clearly showing the factual circumstances of the alleged
fraud.49 Fraud cannot be presumed from a party's mere failure to comply with his or her
obligation. Moreover, the Rules of Court require that in all averments of fraud, the
circumstances constituting it must be stated with particularity.50

In Republic,  we defined fraud as:

[A]s the voluntary execution of a wrongful act or a wilful omission, while knowing and
intending the effects that naturally and necessarily arise from that act or omission. In
its general sense, fraud is deemed to comprise anything calculated to deceive —
including all acts and omission and concealment involving a breach of legal or equitable
duty, trust, or confidence justly reposed — resulting in damage to or in undue
advantage over another. Fraud is also described as embracing all multifarious means
that human ingenuity can device, and is resorted to for the purpose of securing an
advantage over another by false suggestions or by suppression of truth; and it includes
all surprise, trick, cunning, dissembling, and any other unfair way by which another is
cheated.51 (Citations omitted.)

By way of example, in Metro, Inc. v. Lara's Gifts and Decors, Inc.,52 we ruled that the
factual circumstances surrounding the parties' transaction clearly showed fraud. In this
case, the petitioners entered into an agreement with respondents where the
respondents agreed that they will endorse their purchase orders from their foreign
buyers to the petitioners in order to help the latter's export business. The petitioners
initially promised that they will transact only with the respondents and never directly
contact respondents' foreign buyers. To convince respondents that they should trust the
petitioners, petitioners even initially remitted shares to the respondents in accordance
with their agreement. However, as soon as there was a noticeable increase in the
volume of purchase orders from respondents' foreign buyers, petitioners abandoned
their contractual obligation to respondents and directly transacted with respondents'
foreign buyers. We found in this case that the respondents' allegation (that the
petitioners undertook to sell exclusively through respondents but then transacted
directly with respondents' foreign buyer) is sufficient allegation of fraud to support the
issuance of a writ of preliminary attachment.53

In contrast, in PCL Industries Manufacturing Corporation v. Court of Appeals,54 we found

no fraud that would warrant the issuance of a writ of preliminary attachment. In that
case, petitioner purchased printing ink materials from the private respondent. However,

53 | P a g e
petitioner found that the materials delivered were defective and thus refused to pay its
obligation under the sales contract. Private respondent insisted that petitioner's refusal
to pay after the materials were delivered to it amounted to fraud. We disagreed. We
emphasized our repeated and consistent ruling that the mere fact of failure to pay after
the obligation to do so has become due and despite several demands is not enough to
warrant the issuance of a writ of preliminary attachment.55

An examination of the Bitera Affidavit reveals that it failed to allege the existence of
fraud with sufficient specificity. The affidavit merely states that MIS refused to pay its
obligation because it demanded a set off between its obligation to Tsuneishi and
Tsuneishi's liability for MIS' losses caused by the delay in the turn-over of the vessel.
The affidavit insists that this demand for set off was not legally possible. Clearly, there
is nothing in the affidavit that even approximates any act of fraud which MIS committed
in the performance of its obligation. MIS' position was clear: Tsuneishi caused the
damage in the vessel's engine which delayed its trip and should thus be liable for its
losses. There is no showing that MIS performed any act to deceive or defraud
Tsuneishi.

In Watercraft Venture Corporation v. Wolfe,56 we ruled that an affidavit which does not
contain concrete and specific grounds showing fraud is inadequate to sustain the
issuance of the writ of preliminary attachment.57

Moreover, the record tells a different story.

The record shows that Tsuneishi released the vessel in September 2006. MIS signed the
Agreement of the Final Price only in November 2006. Thus, Tsuneishi's claim that MIS'
act of signing the document and making it believe that MIS will pay the amount stated
is the fraudulent act which induced it to release the vessel cannot stand. Tsuneishi
agreed to release the vessel even before MIS signed the document. It was thus not the
act which induced Tsuneishi to turn over the vessel.

Further, Tsuneishi is well aware of MIS' claims. It appears from the record, and as
admitted by MIS in its pleadings, that the reason for its refusal to pay is its claim that
its obligation should be set off against Tsuneishi's liability for the losses that MIS
incurred for the unwarranted delay in the turn-over of the vessel. MIS insists that
Tsuneishi is liable for the damage on the vessel. This is not an act of fraud. It is not an
intentional act or a willful omission calculated to deceive and injure Tsuneishi. MIS is
asserting a claim which it believes it has the right to do so under the law. Whether MIS'
position is legally tenable is a different matter. It is an issue fit for the court to decide.
Notably, MIS filed this as a counterclaim in the case pending before the RTC.58 Whether
MIS is legally correct should be threshed out there.

Even assuming that MIS is wrong in refusing to pay Tsuneishi, this is nevertheless not
the fraud contemplated in Section 1(d), Rule 57 of the Rules of Court. Civil law grants
Tsuneishi various remedies in the event that the trial court rules in its favor such as the
payment of the obligation, damages and legal interest. The issuance of a writ of
preliminary attachment is not one of those remedies.

There is a reason why a writ of preliminary attachment is available only in specific cases
enumerated under Section 1 of Rule 57. As it entails interfering with property prior to a

54 | P a g e
determination of actual liability, it is issued with great caution and only when warranted
by the circumstances. As we said in Ng Wee v. Tankiansee,59 the rules on the issuance
of the writ of preliminary attachment as a provisional remedy are strictly construed
against the applicant because it exposes the debtor to humiliation and annoyance.60

Moreover, we highlight that this petition for review on certiorari  arose out of a Decision
of the CA in a Rule 65 petition. In cases like this, this Court's duty is only to ascertain
whether the CA was correct in ruling that the RTC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.

Jurisprudence has consistently held that a court that issues a writ of preliminary
attachment when the requisites are not present acts in excess of its
jurisdiction.61 In Philippine Bank of Communications v. Court of Appeals, 62 we
highlighted:

Time and again, we have held that the rules on the issuance of a writ of attachment
must be construed strictly against the applicants. This stringency is required because
the remedy of attachment is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present, then the court which issues it
acts in excess of its jurisdiction.63 (Citation omitted.)

In accordance with consistent jurisprudence, we must thus affirm the ruling of the CA
that the RTC, in issuing a writ of preliminary attachment when the requisites under the
Rules of Court were clearly not present, acted with grave abuse of discretion.

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the

Court of Appeals dated October 7, 2009 and its Resolution dated August 26, 2010
are AFFIRMED.

SO ORDERED.

55 | P a g e
 FIRST DIVISION

G.R. No. 169694, December 09, 2015

MEGAWORLD PROPERTIES AND HOLDINGS, INC., EMPIRE EAST LAND

HOLDINGS, INC., AND ANDREW L. TAN, Petitioners, v. MAJESTIC FINANCE AND
INVESTMENT CO., INC., RHODORA LOPEZ-LIM, AND PAULINA
CRUZ, Respondents.

DECISION

BERSAMIN, J.:

This case arises from a dispute on whether either party of a joint venture agreement to
develop property into a residential subdivision has already performed its obligation as
to entitle it to demand the performance of the other's reciprocal obligation. chanRoblesvirtualLawlibrary

The Case

Under review is the decision promulgated on April 27, 2005,1 whereby the Court of
Appeals (CA) upheld the order issued on November 5, 2002 by the Regional Trial Court,
Branch 67, in Pasig City (RTC) in Civil Case No. 67813 directing the defendants
(petitioners herein) to perform their obligation to provide round-the-clock security for
the property under development.2 Also appealed is the resolution promulgated on
September 12, 2005 denying the petitioners' motion for reconsideration.3 chanRoblesvirtualLawlibrary

Antecedents

On September 23, 1994, Megaworld Properties and Holdings, Inc. (developer) entered
into a Joint Venture Agreement (JVA)4 with Majestic Finance and Investment Co., Inc.
(owner) for the development of the residential subdivision located in Brgy. Alingaro,
General Trias, Cavite. According to the JVA, the development of the 215 hectares of
land belonging to the owner (joint venture property) would be for the sole account of
the developer;5 and that upon completion of the development of the subdivision, the
owner would compensate the developer in the form of saleable residential subdivision
lots.6 The JVA further provided that the developer would advance all the costs for the
relocation and resettlement of the occupants of the joint venture property, subject to
reimbursement by the owner;7 and that the developer would deposit the initial amount
of P10,000,000.00 to defray the expenses for the relocation and settlement, and the
costs for obtaining from the Government the exemptions and conversion permits, and
the required clearances.8chanroblesvirtuallawlibrary

On September 24, 1994, the developer and owner agreed, through the addendum to
the JVA,9 to increase the initial deposit for the settlement of claims and the relocation of
the tenants from P10,000,000.00 to P60,000,000.00.

On October 27, 1994, the developer, by deed of assignment,10 transferred, conveyed

and assigned to Empire East Land Holdings, Inc. (developer/assignee) all its rights and
obligations under the JVA including the addendum.

56 | P a g e
On February 29, 2000, the owner filed in the RTC a complaint for specific performance
with damages against the developer, the developer/assignee, and respondent Andrew
Tan, who are now the petitioners herein. The complaint, docketed as Civil Case No.
67813, was mainly based on the failure of the petitioners to comply with their
obligations under the JVA,11 including the obligation to maintain a strong security force
to safeguard the entire joint venture property of 215 hectares from illegal entrants and
occupants.

Following the joinder of issues by the petitioners' answer with counterclaim, and by the
respondents' reply with answer to the counterclaim, the RTC set the pre-trial of the
case. At the conclusion of the pre-trial conference, the presentation of the owner's
evidence was suspended because of the parties' manifestation that they would settle
the case amicably. It appears that the parties negotiated with each other on how to
implement the JVA and the addendum.

On September 16, 2002, the owner filed in the RTC a manifestation and
motion,12 praying therein that the petitioners be directed to provide round-the-clock
security for the joint venture property in order to defend and protect it from the
invasion of unauthorized persons. The petitioners opposed the manifestation and
motion,13 pointing out that: (1) the move to have them provide security in the
properties was premature; and (2) under the principle of reciprocal obligations, the
owner could not compel them to perform their obligations under the JVA if the owner
itself refused to honor its obligations under the JVA and the addendum.

On November 5, 2002, the RTC issued its first assailed order,14 directing the developer
to provide sufficient round-the-clock security for the protection of the joint venture
property, as follows:

For consideration is a "Manifestation and Motion" filed by plaintiff, through counsel,

defendants having filed their Opposition thereto, the incident is now ripe for resolution.

After a careful examination of the records of this case, the Court believes that the
defendants should provide security for the 215 hectares land subject of the joint
venture agreement to protect it from unlawful elements as well as to avoid undue
damage which may be caused by the settling of squatters. As specified in Article III par.
(j) of the joint venture agreement which was entered into by plaintiffs and defendants,
the latter shall at its exclusive account and sole expense secure the land in question
from the influx of squatters and/or unauthorized settlers, occupants, tillers, cultivators
and the likes from date of execution of this agreement.

WHEREFORE, and as prayed for, the Court hereby directs the defendants to provide
sufficient round the clock security for the protection of the 215 hectares land subject of
the joint venture agreement during the pendency of this case.

SO ORDERED.

The petitioners sought the reconsideration of the November 5, 2002 order,15 but the
RTC denied the motion on May 19, 2003,16 observing that there was no reason to
reverse the order in question considering that the allegations in the motion for

57 | P a g e
reconsideration, being a mere rehash of those made earlier, had already been passed
upon.

On August 4, 2003, the petitioners instituted a special civil action for certiorari in the
CA,17 claiming therein that the RTC thereby gravely abused its discretion amounting to
lack or excess of jurisdiction in issuing the order of November 5, 2002, specifying the
following grounds, namely:

THE PUBLIC RESPONDENT GRAVELY ABUSED HIS DISCRETION AMOUNTING TO LACK

OR EXCESS OF JURISDICTION IN DIRECTING PETITIONERS TO PROVIDE ROUND THE
CLOCK SECURITY GUARDS ON THE SUBJECT PROPERTIES.

I. THE PUBLIC RESPONDENT ARBITRARILY AND PREMATURELY DISPOSED OF ONE OF

THE RELIEF[S] PRAYED FOR BY PRIVATE RESPONDENTS IN THEIR COMPLAINT WHEN
TRIAL HAS NOT EVEN STARTED.

II. PUBLIC RESPONDENT ARBITRARILY DISREGARDED THE FACT THAT THE PARTIES
ARE DISCUSSING HOW TO PURSUE THE JVA.

III. PUBLIC RESPONDENT ARBITRARILY DISREGARDED THE PRINCIPLE OF

"RECIPROCAL OBLIGATIONS" UNDER THE CIVIL CODE.

On April 27, 2005, the CA promulgated its assailed decision dismissing the petitioner's
petition for certiorari,18 ruling thusly:

On the merits of the petition, our examination of the records shows nothing whimsical
or arbitrary in the respondent judge's order directing the petitioners to provide security
over the joint venture property. Like the respondent judge, we believe that the
obligation of the petitioners under the JVA to provide security in the area, as spelled out
under Article II, par. (c) and Article III, paragraphs (h) and (j), is well established,
thus:

xxxx

These clear and categorical provisions in the JVA -which petitioners themselves do not
question -obviously belie their contention that the respondent judge's order to provide
security for the property is premature at this stage. The petitioner's obligation to secure
the property under the JVA arose upon the execution of the Agreement, or as soon as
the petitioners acquired possession of the joint venture property in 1994, and is
therefore already demandable. The settled rule is that "contracts are the laws between
the contracting parties, and if their terms are clear and leave no room for doubt as to
their intentions, the contracts are obligatory no matter what their forms may be,
whenever the essential requisites for their validity are present." Thus, unless the
existence of this particular obligation - i.e., to secure the joint venture property - is
challenged, petitioners are bound to respect the terms of the Agreement and of his
obligation as the law between them and MAJESTIC.

We stress along this line that the complaint MAJESTIC filed below is for specific
performance and is not for rescission of contract. The complaint presupposes existing
obligations on the part of the petitioners that MAJESTIC seeks to be carried out in

58 | P a g e
accordance with the terms of the Agreement. Significantly, MAJESTIC did not pray in
the complaint that petitioners be ordered to secure the area from the influx of illegal
settlers and squatters because petitioner's obligation in this regard commenced upon
the execution of the JVA and hence, is already an existing obligation. What it did ask is
for the petitioners to maintain a strong security force at all times over the area, in
keeping with their commitment to secure the area from the influx of illegal settlers and
occupant. To be sure, to "maintain" means "to continue", "to carry on", to "hold or keep
in any particular state or condition" and presupposes an obligation that already began.
Thus, contrary to petitioner's submissions, the question of whether or not they have the
obligation to provide security in the area is not at all an issue in the case below. The
issue MAJESTIC presented below is whether or not petitioner should be ordered to
maintain a strong security force within the joint venture property. Hence, in issuing the
assailed orders, the public respondent prejudged no issue that is yet to be resolved
after the parties shall have presented their evidence.

Our conclusion (that the petitioner's obligation to secure and protect the joint venture
property is a non-issue in the case below) necessarily explains why the first assailed
order -although not in the form of a preliminary mandatory injunction -is nonetheless
legally justified. As an established and undisputed interim measure pending the
resolution of the case on the merits, we do not see its enforcement as hindrance to
whatever negotiations the parties may undertake to settle their dispute.

Nor do we find the principle of reciprocal obligations a justification for petitioner's

refusal to perform their commitment of safeguarding the joint venture property. For,
while it is true that the JVA gives rise to reciprocal obligations from both parties, these
obligations are not necessarily demandable at the same time. MAJESTIC's initial
obligation under the JVA is to deliver or surrender to the petitioners the possession of
the joint venture property -an obligation it fulfilled upon the execution of the
Agreement. MAJESTIC's obligation under the JVA to deliver to the petitioners the titles
to the joint venture property and to reimburse them for tenant-related expenses are
demandable at later stages of the contract or upon completion of the development, and
therefore may not be used by the petitioners as an excuse for not complying with their
own currently demandable obligation.

All told, we believe that securing and protecting the area from unlawful elements
benefits both the developer and the landowner who are equally keen in safeguarding
their interests in the project. Otherwise stated, incursion by unlawful settlers into an
unsecured and unprotected joint venture property can only cause great loss and
damage to both parties. Reasons of practicality within legal parameters, rather than
grave abuse of discretion, therefore underlie the respondent judge's challenged orders.

WHEREFORE, premises considered, we hereby DISMISS the petition for lack of merit.

SO ORDERED.19 (Emphasis omitted)

On May 26, 2005, the petitioners filed a motion for reconsideration,20 but the CA denied
the motion on September 12, 2005.21 chanroblesvirtuallawlibrary

Hence, this appeal by petition for review on certiorari. chanRoblesvirtualLawlibrary

59 | P a g e
 Issues

The petitioner submits the following issues:

a. Whether or not the petitioners are obligated to perform their obligations

under the JVA, including that of providing round-the-clock security for the
subject properties, despite respondents' failure or refusal to acknowledge,
or perform their reciprocal obligations there;

b. Whether or not the RTC gravely abused its discretion in directing the
petitioners to perform their obligations under the JVA, including that of
providing round-the-clock security for the subject properties, although the
JVA had been suspended due to the parties' disagreement as to how to
implement the same;

c. Whether or not the RTC gravely abused its discretion in issuing the first
and second assailed orders and prematurely resolving and disposing of
one of the causes of action of the respondents, which was to provide
round-the-clock security for the subject properties, an issue proposed by
the respondents, even before the termination of the pre-trial;

d. Whether or not the RTC gravely abused its discretion in issuing the first
and second assailed orders in clear disregard of the mandatory
requirements of Rule 58 of the Rules of Court.22 chanroblesvirtuallawlibrary

Ruling of the Court

The appeal is meritorious. The CA erred in upholding the November 5, 2002 order of
the RTC.

The obligations of the parties under the JVA were unquestionably reciprocal. Reciprocal
obligations are those that arise from the same cause, and in which each party is a
debtor and a creditor of the other at the same time, such that the obligations of one are
dependent upon the obligations of the other. They are to be performed simultaneously,
so that the performance by one is conditioned upon the simultaneous fulfillment by the
other.23 As the Court has expounded in Consolidated Industrial Gases, Inc. v. Alabang
Medical Center:24 chanroblesvirtuallawlibrary

Reciprocal obligations are those which arise from the same cause, and in which each
party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed simultaneously,
so that the performance of one is conditioned upon the simultaneous fulfillment of the
other. In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other begins.

xxxx

60 | P a g e
In reciprocal obligations, before a party can demand the performance of the obligation
of the other, the former must also perform its own obligation. For its failure to turn over
a complete project in accordance with the terms and conditions of the installation
contracts, CIGI cannot demand for the payment of the contract price balance from
AMC, which, in turn, cannot legally be ordered to pay.25 chanrobleslaw

The determination of default on the part of either of the parties depends on the terms
of the JVA that clearly categorized the parties' several obligations into two types.

The first type related to the continuous obligations that would be continuously

performed from the moment of the execution of the JVA until the parties shall have
achieved the purpose of their joint venture. The continuous obligations under the JVA
were as follows: (1) the developer would secure the joint venture property from
unauthorized occupants;26 (2) the owner would allow the developer to take possession
of the joint venture property;27 (3) the owner would deliver any and all documents
necessary for the accomplishment of each activity;28 and (4) both the developer and the
owner would pay the real estate taxes.29 chanroblesvirtuallawlibrary

The second type referred to the activity obligations. The following table shows the
activity obligations of the parties under the JVA, to wit:

SEQUENCE OF ACTIVITIES (Article XIV of the JVA)

ACTIVITY OWNER DEVELOPER
OBLIGATION OBLIGATION
Signing of JVA. Sign JVA Sign JVA
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. IIIa par. 2
successful development of the Deposit P10M
Project
Art. V par. 2
Pay real estate taxes
Art. II(g)
Warrant absolute ownership
DEVELOPER to negotiate Art. II(b) Art. V par. 2
immediately with all tenants, Deliver any and all Pay real estate taxes
settlers, occupants, tillers, documents required for the Art. II(c)
cultivators of the land in successful development of the Take possession of the parcels
question. Project of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from invasion
Art. II(c) of squatters and other elements
Allow DEVELOPER to take Art. III (c)
possession of subject property To negotiate with occupants
DEVELOPER to pay and Art. II(b) Art. V par. 2

61 | P a g e
settle all monetary claims of Deliver any and all
all tenants, settlers, occupants, documents required for the
tillers, cultivators of the land. successful development of the
Project
Art. V par. 2
Pay real estate taxes
Art. VI
Must consent on the
reasonableness of the
expenses.
DEVELOPER to relocate and Art. II(b)
transfer all the tenants, Deliver any and all
settlers, occupants, tillers, documents required for the
cultivators of the land to their successful development of the
relocation site, and shall Project
endeavor to fulfill the same Art. V par. 2
and the two immediately Pay real estate taxes
preceding paragraphs (b & c) Art. II(d)
up to the extent of 75% Agree to allocate and
accomplishment thereof aggregate a resettlement site
within a period of one (1) year within the property subject to
from date of execution of this mutually accepted conditions.
Agreement. The remaining Art. VI
25% of the same requirements Must consent on the
shall be fully accomplished reasonableness of the
within another 6 months from expenses.
date of expiration of the
original one-year period.
DEVELOPER to apply for Art. II(b)
and secure exemption or Deliver any and all
conversion permit and such documents required for the
other related requirements successful development of the
needed for the approval of Project
exemption or conversion Art. V par. 2
application of the land in Pay real estate taxes
question within a period of Art. II(f)
one and a half (1 1/2) years Assist DEVELOPER secure
from date of execution of this exemption from CARL and
Agreement subject to a six (6) conversion/reclassification of
month extension. subject property
Art. III(b)
Give DEVELOPER authority
62 | P a g e
Pay real estate taxes
Art. II(c)
Take possession of the parcels
of land
Art. III (j)
Secure property from invasion
of squatters and other elements
Art. III(a) par. 1
Advance expense for
settlement and relocation
Art. III(a) par. 2
Deposit P10M in a joint
account of parties.
Art. V par. 2
Pay real estate taxes
Art. III(c)
Take possession of the parcels
of land
Art. III(j)
Secure property from invasion
of squatters and other elements
Art. III(a) par. 1
Advance expense for
settlement and relocation
Art. III(a)par. 2
Deposit P10M in a joint
account of OWNER and
DEVELOPER
Art. III(c)
Relocate the occupants
Art. V par. 2
Pay real estate taxes
Art. II(c) 
Take possession of the parcels
of land
Art. III (j)
Secure property from invasion
of squatters and other elements
Art. III(a)
Advance expenses for
exemption, conversion, re-
classification expenses.
Art.III(b) secure exemption
and conversion permit

DEVELOPER to lay out a
complete Development Plan
DEVELOPER to apply for
and secure all necessary
development permit,
performance bonds,
environmental compliance
certificate, license to sell and
all other related requirement
from the pertinent Municipal
Government, DENR, HLURB
and other governmental
agencies concerned within a
period of 2 years from date of
execution of this Agreement.
DEVELOPER
construction stage/ground
breaking to commence after
release of DAR exemption
permit or conversion
clearance and approval of
other required permits by
pertinent agencies of the
government.
DEVELOPER to secure
approval of subdivision plan
and technical description from
the Bureau of Lands based on
63 | P a g e
to apply for exemption,
conversion and re-
classification.
Art. VI
Must consent on the
reasonableness of the
expenses.
Art.III(i)
Give written conformity to
the development plan
Art. II(b)
Deliver any and all
documents required for the
successful development of the
Project
Art. V par. 2
Pay real estate taxes
Art. II(b)
Deliver any and all
documents required for the
successful development of the
Project
Art. V par. 2
Pay real estate taxes
Art. II(b)
Deliver any and all
documents required for the
successful development of the
Art. III(d)
Complete comprehensive
development plan (within 6
months to one year from the
execution of the JVA)
Art. V par. 2
Pay real estate taxes
Art. II(c)
Take possession of the parcels
of land
Art. III (j)
Secure property from invasion
of squatters and other elements
Art. III(f)
Secure development permit,
ECC, License to Sell, etc.
Art. V par. 2
Pay real estate taxes
Art. II(c)
Take possession of the parcels
of land
Art. III (j)
Secure property from invasion
of squatters and other elements
Art. III(e)
Mobilize development work
and solely pay its expenses
Art. III(f)
Develop the property and
solely pay its expenses on
necessary permits
Art. V par. 2
Pay real estate taxes
Art. II(c)
Take possession of the parcels
the approved scheme and Project of land
thereafter to petition, follow- Art. V par. 2 Art. III (j)
up and secure the release of Pay real estate taxes Secure property from invasion
individual titles for all lots in Art. II(a) of squatters and other elements
the project in the respective Deliver titles to Art. III(k)
names of the parties form the DEVELOPER Process titling of lots
register of deeds. Art. II(a)
Execute Deed of Assignment
Art. III(a)
Pay all expenses for
settlement of claims,
relocation, application for
exemption, conversion, re-
classification.
Market and Sell the property Fix selling date Fix selling date
Owner to reimburse and pay
the DEVELOPER

The activities under the JVA fell into seven major categories, specifically: (l)the
relocation of the occupants; (2) the completion of the development plan; (3) the
securing of exemption and conversion permits; (4) the obtention of the development
permits from government agencies; (5) the development of the subject land; (6) the
issuance of titles for the subdivided lots; and (7) the selling of the subdivided lots and
the reimbursement of the advances.

For the first activity (i.e., the relocation of the occupants), the developer was obliged to
negotiate with the occupants, to advance payment for disturbance compensation, and
to relocate the occupants to an area within the subject land, while the owner was
obliged to agree to and to allocate the resettlement site within the property, and to
approve the expenses to be incurred for the process. Should the owner fail to allocate
the site for the resettlement, the obligation of the developer to relocate would not be
demandable. Conversely, should the developer fail to negotiate with the occupants, the
owner's obligation to allocate the resettlement site would not become due.

As to the second activity (i.e., the completion of the development plan), the developer
had the obligation to lay out the plan, but the owner needed to conform to the plan
before the same was finalized. Accordingly, the final development plan would not be
generated should the owner fail to approve the lay-out plan; nor would the owner be
able to approve if no such plan had been initially laid out by the developer.

In each activity, the obligation of each party was dependent upon the obligation of the
other. Although their obligations were to be performed simultaneously, the performance
of an activity obligation was still conditioned upon the fulfillment of the continuous
obligation, and vice versa. Should either party cease to perform a continuous
obligation, the other's subsequent activity obligation would not accrue. Conversely, if an
activity obligation was not performed by either party, the continuous obligation of the

64 | P a g e
other would cease to take effect. The performance of the continuous obligation was
subject to the resolutory condition that the precedent obligation of the other party,
whether continuous or activity, was fulfilled as it became due. Otherwise, the
continuous obligation would be extinguished.

According to Article 1184 of the Civil Code, the condition that some event happen at a
determinate time shall extinguish the obligation as soon as the time expires, or if it has
become indubitable that the event will not take place. Here, the common cause of the
parties in entering into the joint venture was the development of the joint venture
property into the residential subdivision as to eventually profit therefrom.
Consequently, all of the obligations under the JVA were subject to the happening of the
complete development of the joint venture property, or if it would become indubitable
that the completion would not take place, like when an obligation, whether continuous
or activity, was not performed. Should any of the obligations, whether continuous or
activity, be not performed, all the other remaining obligations would not ripen into
demandable obligations while those already performed would cease to take effect. This
is because every single obligation of each party under the JVA rested on the common
cause of profiting from the developed subdivision.

It appears that upon the execution of the JVA, the parties were performing their
respective obligations until disagreement arose between them that affected the
subsequent performance of their accrued obligations. Being reciprocal in nature, their
respective obligations as the owner and the developer were dependent upon the
performance by the other of its obligations; hence, any claim of delay or non-
performance against the other could prosper only if the complaining party had faithfully
complied with its own correlative obligation.30chanroblesvirtuallawlibrary

A respected commentator has cogently observed in this connection:31 chanroblesvirtuallawlibrary

§ 135. Same; consequences of simultaneous performance. As a consequence of

the rule of simultaneous performance, if the party who has not performed his obligation
demands performance from the other, the latter may interpose the defense of
unfulfilled contract (exceptio non adimpleli contraclus) by virtue of which he cannot be
obliged to perform while the other's obligation remains unfulfilled. Hence, the Spanish
Supreme Court has ruled that the non-performance of one party is justified if based on
the non-performance of the other; that the party who has failed to perform cannot
demand performance from the other; and that judicial approval is not necessary to
release a party from his obligation, the non-performance of the other being a sufficient
defense against any demand for performance by the guilty party.

Another consequence of simultaneous performance is the rule of compensatio

morae, that is to say that neither party incurs in delay if the other does not or is not
ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligations, delay by the other begins.

Yet, the record is bereft of the proof to support the lower courts' unanimous conclusion
that the owner had already performed its correlative obligation under the JVA as to
place itself in the position to demand that the developer should already perform its
obligation of providing the round-the-clock security on the property. In issuing its order
of November 5, 2002, therefore, the RTC acted whimsically because it did not first

65 | P a g e
ascertain whether or not the precedent reciprocal obligation of the owner upon which
the demanded obligation of the developer was dependent had already been performed.
Without such showing that the developer had ceased to perform a continuous obligation
to provide security over the joint venture property despite complete fulfillment by the
owner of all its accrued obligations, the owner had no right to demand from the
developer the round-the-clock security over the 215 hectares of land.

The CA further gravely erred in characterizing the order for the petitioners to
implement the round-the-clock security provision of the JVA and the addendum as an
established and undisputed interim measure that could be issued pending the resolution
of the case on the merits.

Apart from the provisional remedies expressly recognized and made available under
Rule 56 to Rule 61 of the Rules of Court, the Court has sanctioned only the issuance of
the status quo ante order but only to maintain the last, actual, peaceable and
uncontested state of things that preceded the controversy.32 The eminent Justice
Florenz D. Regalado,33 an authority on remedial law, has delineated the nature of
the status quo ante  order, and distinguished it from the provisional remedy of
temporary restraining order, as follows:

There have been instances when the Supreme Court has issued a status quo  order
which, as the very term connotes, is merely intended to maintain the last, actual,
peaceable and uncontested state of things which preceded the controversy. This was
resorted to when the projected proceedings in the case made the conservation of
the status quo desirable or essential, but the affected party neither sought such relief
or the allegations in his pleading did not sufficiently make out a case for a temporary
restraining order. The status quo order was thus issued motu proprio on equitable
considerations. Also, unlike a temporary restraining order or a preliminary injunction,
a status quo  order is more in the nature of a cease and desist order, since it neither
directs the doing or undoing of acts as in the case of prohibitory or mandatory
injunctive relief. The further distinction is provided by the present amendment in the
sense that, unlike the amended rule on restraining orders, a  status quo order does not
require the posting of a bond.

The order of November 5, 2002, by directing the developer to provide sufficient round-
the-clock security for the protection of the joint venture property during the pendency
of the case, was not of the nature of the status quo ante order because the developer,
as averred in the complaint, had not yet provided a single security watchman to secure
the entire 215 hectares of land for several years.34 Also, the owner stated in the
comment to the petition that the developer had dismissed all the security guards posted
in the property since 1997.35 At the time of the filing of the complaint for specific
performance on February 29, 2000, therefore, the last actual, peaceable and
uncontested state of things preceding the controversy was the absence of such
security, not the installation of the security personnel/measures. In fact, the failure of
the developer to provide the round-the-clock security itself became the controversy
that impelled the owner to bring the action against the petitioners.

By preliminarily directing the developer to provide sufficient round-the-clock security for

the protection of the joint venture property during the pendency of the case, the
November 5, 2002 order of the RTC did not come under the category of the status quo

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ante order that would issue upon equitable consideration, or even of an injunctive relief
that would issue under Rule 58 of the Rules of Court. Hence, the issuance of the order
constituted a blatant jurisdictional error that needed to be excised. Verily, a
jurisdictional error is one by which the act complained of was issued by the court
without or in excess of jurisdiction.36Without jurisdiction means that the court acted
with absolute want of jurisdiction. Excess of jurisdiction means that the court has
jurisdiction but has transcended the same or acted without any statutory authority.37 chanroblesvirtuallawlibrary

Although the RTC undoubtedly had jurisdiction to hear and decide the principal action
for specific performance as well as to act on the motions submitted to it in the course of
the proceedings, the distinction between jurisdiction over the case and jurisdiction to
issue an interlocutory order as an ancillary remedy incident to the principal action
should be discerned. We have frequently declared that a court may have jurisdiction
over the principal action but may nevertheless act irregularly or in excess of its
jurisdiction in the course of its proceedings by the granting of an auxiliary
remedy.38 In Leung Ben v. O'Brien,39 for instance, this Court has thus clarified:

It may be observed in this connection that the word "jurisdiction" as used in attachment
cases, has reference not only to the authority of the court to entertain the principal
action but also to its authority to issue the attachment, as dependent upon the
existence of the statutory ground. (6 C. J., 89.) This distinction between jurisdiction to
issue the attachment as an ancillary remedy incident to the principal litigation is of
importance; as a court's jurisdiction over the main action may be complete, and yet it
may lack authority to grant an attachment as ancillary to such action. This distinction
between jurisdiction over the ancillary has been recognized by this court in connection
with actions involving the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield
and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal
justification. It was held that the order making the appointment was beyond the
jurisdiction of the court; and though the court admittedly had jurisdiction of the main
cause, the order was vacated by this court upon application a writ of certiorari. (See
Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep.,
735, Yangco vs. Rohde, 1 Phil. Rep., 404.)

By parity of reasoning it must follow that when a court issues a writ of attachment for
which there is no statutory authority, it is acting irregularly and in excess of its
jurisdiction, in the sense necessary to justify the Supreme Court in granting relief by
the writ of certiorari.

WHEREFORE, the Court GRANTS the petition for review

on certiorari; REVERSES and SETS ASIDE the decision promulgated on April 27, 2005
and the resolution promulgated on September 12, 2005; NULLIFIES the orders issued
on November 5, 2002 and May 19, 2003 in Civil Case No. 67813 by the Regional Trial
Court, Branch 67, in Pasig City; DIRECTS the Regional Trial Court, Branch 67, in Pasig
City to resume the proceedings in Civil Case No. 67813 with dispatch; and ORDERS the
respondents to pay the costs of suit.

SO ORDERED. c

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 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 185734               July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.

RESOLUTION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 are the July 10, 2008 Decision2 and December 18,
2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29,
2007 Order4 of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of
preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a
writ of preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S.
Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of ₱2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the latter to the former, as well as interests,
attorney’s fees, and costs. The RTC granted the writ of preliminary attachment application 6 and upon
the posting of the required ₱2,160,000.00 bond, 7 issued the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by Transfer Certificates
of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps.
Lazaro, were levied upon.9

In their Answer with Counterclaim, 10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause
of action against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the
fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but
by Virgilio Arcinas and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim,
Sps. Lazaro alleged that the same had already been substantially reduced on account of previous
payments which were apparently misapplied. In this regard, they sought for an accounting and
reconciliation of records to determine the actual amount due. They likewise argued that no fraud
should be imputed against them as the aforesaid checks issued to Colim were merely intended as a
form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ
of preliminary attachment.12

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement 13 whereby
Sps. Lazaro agreed to pay Lim, Jr. the amount of ₱2,351,064.80 on an installment basis, following a
schedule of payments covering the period from September 2006 until October 2013, under the
following terms, among others: (a) that should the financial condition of Sps. Lazaro improve, the
monthly installments shall be increased in order to hasten the full payment of the entire
obligation;14 and (b) that Sps. Lazaro’s failure to pay any installment due or the dishonor of any of the

68 | P a g e
postdated checks delivered in payment thereof shall make the whole obligation immediately due and
demandable.

The aforesaid compromise agreement was approved by the RTC in its October 31, 2006
Decision15 and January 5, 2007 Amended Decision. 16

Subsequently, Sps. Lazaro filed an Omnibus Motion, 17 seeking to lift the writ of preliminary
attachment annotated on the subject TCTs, which the RTC granted on March 29, 2007. 18 It ruled that
a writ of preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to
protect and preserve certain rights and interests pending final judgment. Considering that the case
had already been considered closed and terminated by the rendition of the January 5, 2007
Amended Decision on the basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it ordered the Registry of Deeds
of Bulacan to cancel the writ’s annotation on the subject TCTs.

Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26,
2007,20 prompting him to file a petition for certiorari 21 before the CA.

The CA Ruling

On July 10, 2008, the CA rendered the assailed decision, 22 finding no grave abuse of discretion on
the RTC’s part. It observed that a writ of preliminary attachment may only be issued at the
commencement of the action or at any time before entry of judgment. Thus, since the principal
cause of action had already been declared closed and terminated by the RTC, the provisional or
ancillary remedy of preliminary attachment would have no leg to stand on, necessitating its
discharge.23

Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied by the CA in its
December 18, 2008 Resolution.25

Hence, the instant petition.

The Issue Before the Court

The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.

The Court’s Ruling

The petition is meritorious.

By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary
remedy applied for not for its own sake but to enable the attaching party to realize upon the relief
sought and expected to be granted in the main or principal action; it is a measure auxiliary or
incidental to the main action. As such, it is available during its pendency which may be resorted to by
a litigant to preserve and protect certain rights and interests during the interim, awaiting the ultimate
effects of a final judgment in the case.26 In addition, attachment is also availed of in order to acquire
jurisdiction over the action by actual or constructive seizure of the property in those instances where
personal or substituted service of summons on the defendant cannot be effected. 27

In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates

69 | P a g e
that the said lien continues until the debt is paid, or the sale is had under execution issued on the
judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same
manner provided by law.28

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.

Records indicate that while the parties have entered into a compromise agreement which had
already been approved by the RTC in its January 5, 2007 Amended Decision, the obligations
thereunder have yet to be fully complied with – particularly, the payment of the total compromise
amount of ₱2,351,064.80. Hence, given that the foregoing debt remains unpaid, the attachment of
Sps. Lazaro’s properties should have continued to subsist.

In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is
not extinguished by the execution of a compromise agreement between the parties, viz:

Did the compromise agreement between Antonio Garcia and the consortium discharge the latter’s
attachment lien over the disputed shares?

CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the
case, dies a natural death. Thus, when the consortium entered into a compromise agreement, which
resulted in the termination of their case, the disputed shares were released from garnishment.

We disagree. To subscribe to CEIC’s contentions would be to totally disregard the concept and
purpose of a preliminary attachment.

xxxx

The case at bench admits of peculiar character in the sense that it involves a compromise
agreement. Nonetheless, x x x. The parties to the compromise agreement should not be deprived of
the protection provided by an attachment lien especially in an instance where one reneges on his
obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his
own end of the deal, so to speak.

xxxx

If we were to rule otherwise, we would in effect create a back door by which a debtor can easily
escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor,
in order to buy time to dispose of his properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the provisional remedy of attachment
would thus be lost. It would become, in analogy, a declawed and toothless tiger. (Emphasis and
underscoring supplied; citations omitted)

In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored
and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the
properties covered by the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature
of a vested interest which affords specific security for the satisfaction of the debt put in suit. 30 Verily,
the lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.’s rights over Sps.
Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot allow.

70 | P a g e
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE,
and the March 29, 2007 Order of the Regional Trial Court of Quezon City, Branch 223 is
NULLIFIED. Accordingly, the trial court is directed to RESTORE the attachment lien over Transfer
Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.

SO ORDERED.

71 | P a g e
 THIRD DIVISION

G.R. No. 203530, April 13, 2015

LUZON DEVELOPMENT BANK, TOMAS CLEMENTE, JR., AND OSCAR

RAMIREZ, Petitioners, v. ERLINDA KRISHNAN, Respondent.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure praying for the annulment of the Decision1 dated March 27, 2012 and
Resolution2 dated September 11, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
120664, which affirmed the Orders dated September 24, 2010 and May 26, 2011,
respectively, of Branch 30, Regional Trial Court (RTC) - Manila.

The factual antecedents, as found by the CA, are as follows: chanroblesvirtuallawlibrary

Petitioners Luzon Development Bank, Tomas Clemente, and Oscar Ramirez (hereafter
petitioners) are the respondents in the complaint for Collection of Sum of Money and
Damages filed by respondent Erlinda Khrishnan (hereafter respondent Erlinda) on
February 7, 2001. Respondent Erlinda claimed that she is a client of respondent bank
wherein she maintained several accounts including time deposits. On several occasions,
when respondent Erlinda presented her Time Deposits Certificates amounting to
P28,597,472.70 for payment because they have become due, petitioners refused to
honor them for the reason that they were fraudulent. Respondent Erlinda likewise
applied for a Preliminary Writ of Attachment which the RTC granted on February 27,
2001.

By virtue of the writ, petitioner bank's accounts in BPI Family Bank, Calamba, Laguna in
the amount of P28,597,472.70 and its account amounting to P49,000,000.00 in the
Central Bank were garnished.

On March 9, 2001, petitioners filed an urgent ex-parte Motion to Recall Quash and/or
Lift Attachment or Garnishment (in excess of amounts in the writ). Respondent Erlinda
opposed the motion.

On August 15, 2001, petitioners filed an Omnibus Motion seeking the substitution of
their garnished account with government securities and the immediate resolution of
their motion to discharge attachment and setting the motion for hearing, which
respondent Erlinda opposed.

On May 22, 2002, the RTC resolved the pending incidents and required the petitioners
to justify their motion to discharge the attachment. During pre-trial on May 23, 2002,
respondents requested additional time to file a supplemental motion to justify their
earlier motions which was granted and gave petitioners ten (10) days from receipt
within which to comment or opposed (sic) it.

72 | P a g e
On September 8, 2003, the RTC issued an order lifting the attachment to which
respondent Erlinda filed a motion for reconsideration. Respondent Erlinda also filed a
Motion for Inhibition. On December 18, 2003, the RTC denied the motion for
reconsideration but granted the motion for inhibition. The said Order was questioned by
respondent Erlinda by way of Petition for Certiorari before the 7th Division which
rendered a decision on November 15, 2006, the dispositive portion of which reads as
follows: chanroblesvirtuallawlibrary

"WHEREFORE, the PETITION FOR CERTIORARI is GRANTED.

THE ORDERS dated September 8, 2003, and December 18, 2003 are NULLIFIED and
SET ASIDE.

The private respondents, as defendants in Civil Case No. 01-100046 entitled Erlinda C.

Krishnan v. Luzon Development Bank, et al., are ORDERED to file a counterbond in
accordance with Sec. 12, Rule 57, 1997 Rules of Civil Procedure, within 10 days from
the finality of this decision; otherwise, the REGIONAL TRIAL COURT, BRANCH 36, in
Manila shall immediately reinstate the writ of attachment issued and implemented in
Civil Case No. 01-100046.

Costs of suit to be paid by the respondents. SO ORDERED.

Petitioners' subsequent motion for reconsideration was denied. Thereafter, their petition
and motion for reconsideration before the Supreme Court were likewise denied.

On May 09, 2008, respondent judge issued an Order directing respondent Erlinda to file
a new attachment bond in the amount of P35,000,000.00 and petitioners to file a
counterbond within ten days from notice of the filing and approval of the bond of
respondent Erlinda. Petitioners moved for the reconsideration of the said Order which
respondent judge denied and granted a period of fifteen days for respondent Erlinda to
file an attachment bond.

Respondent Erlinda filed her attachment bond on June 25, 2009 in the amount of
P35,000,000.00 through Visayan Surety and Insurance Corporation which was
approved by respondent on July 7, 2009.

Meanwhile, on July 3, 2009, petitioners filed an Omnibus Motion praying that a hearing
be held to determine the sufficiency of the attachment bond and they be allowed to
deposit Certificates of Title of real property, and the issuance of the writ of attachment
be held in abeyance.

On July 20, 2009, petitioners filed a motion for extension of time to comply and/or file
the appropriate pleading and to hold in abeyance the reinstatement of the writ of
attachment.

On January 28, 2010, petitioners filed a motion to admit bank property in lieu of
counterbond which was opposed by respondent Erlinda.

On September 24, 2010, respondent judge denied petitioners' motion in the assailed
Order. Their subsequent motion for reconsideration was denied on May 26, 2011.

On June 27, 2011, respondent judge issued an Order reinstating the Writ of Attachment

73 | P a g e
dated March 1, 2001 for failure of petitioners to file the required counterbond.
Respondent judge also issued an amended Reinstated Writ of Attachment directing
respondent Sheriff Oscar L. Rojas (hereafter respondent Sheriff) to attach the real
estate or personal properties of petitioners in the amount of P28,597,472.70. On June
30, 2011, the sheriff served the Notice of Garnishment and the Amended Reinstated
Writ of Attachment.

On July 4, 2011, petitioners filed an urgent motion to recall, suspend or hold in

abeyance and re-examination of the amended reinstated writ of preliminary attachment
of June 27, 2011 which was opposed by respondent Erlinda.

On July 19, 2011, respondent Sheriff issued a Sheriffs Partial Report. Thereafter,
petitioners filed this petition for certiorari x x x.
In a Decision dated March 27, 2012, the CA dismissed petitioners' certiorari petition and
affirmed the Orders of the RTC reinstating the Writ of Attachment for failure of
petitioners to file the required counter-bond. The CA ruled that the RTC judge
committed no grave abuse of discretion in denying petitioners' motion to admit bank
property in lieu of counter-bond, thus, it held:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is DISMISSED and accordingly, DENIED

DUE COURSE. The Orders dated September 24, 2010 and May 26, 2011 are hereby
AFFIRMED.

SO ORDERED.3 cralawlawlibrary

Petitioners filed a motion for reconsideration against said decision, but the same was
denied in a Resolution dated September 11, 2012.

Hence, petitioners filed this present petition raising the following grounds: chanroblesvirtuallawlibrary

IN THE FIRST ASSAILED ORDER THE HONORABLE COURT OF APPEALS ACTED WITH
GRAVE ABUSE OF DISCRETION WHEN IT MISCONSTRUED AND FAILED TO RULE ON
THE CORRECT LEGAL ISSUE PRESENTED IN THE PETITION FOR CERTIORARI.4

IN THE SECOND ASSAILED ORDER THE FIONORABLE COURT OF APPEALS AGAIN

ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO PRESENT ANY LEGAL
BASIS FOR STATING THAT RULE 39 OF THE REVISED RULES OF COURT DOES NOT
APPLY.5 cralawlawlibrary

Simply stated, the issue for our resolution is whether the CA erred in affirming the
RTC's decision which denied petitioners' motion praying that bank property be
deposited in lieu of cash or a counter-bond.

In their petition, petitioners contend that it has the option to deposit real property, in
lieu of cash or a counter-bond, to secure any contingent lien on its property in the
event respondent wins the case. They argue that Section 2 of Rule 57 only mentions
the term "deposit," thus, it cannot only be confined or construed to refer to cash.

We rule in the negative.

Section 2, Rule 57 of the Rules of Court explicitly states that "[a]n order of attachment
may be issued either ex parte or upon motion with notice and hearing by the court in

74 | P a g e
which the action is pending, or by the Court of Appeals or the Supreme Court, and must
require the sheriff of the court to attach so much of the property in the Philippines of
the party against whom it is issued, not exempt from execution, as may be sufficient to
satisfy the applicant's demand, unless such party makes deposit or gives a bond
as hereinafter provided in an amount equal to that fixed in the order, which
may be the amount sufficient to satisfy the applicant's demand or the value of the
property to be attached as stated by the applicant, exclusive of costs."

Section 5 of the same Rule likewise states that "[t]he sheriff enforcing the writ shall
without delay and with all reasonable diligence attach, to await judgment and execution
in the action, only so much of the property in the Philippines of the party against whom
the writ is issued, not exempt from execution, as may be sufficient to satisfy the
applicant's demand, unless the former makes a deposit with the court from
which the writ is issued, or gives a counter-bond executed to the applicant, in
an amount equal to the bond fixed by the court in the order of attachment or
to the value of the property to be attached, exclusive of costs."

From the foregoing, it is evidently clear that once the writ of attachment has been
issued, the only remedy of the petitioners in lifting the same is through a cash deposit
or the filing of the counter-bond. Thus, the Court holds that petitioner's argument that
it has the option to deposit real property instead of depositing cash or filing a counter-
bond to discharge the attachment or stay the implementation thereof is unmeritorious.

In fact, in Security Pacific Assurance Corporation v. Tria-Infante,6 we held that one of

the ways to secure the discharge of an attachment is for the party whose property has
been attached or a person appearing on his behalf, to post a counterbond or make the
requisite cash deposit in an amount equal to that fixed by the court in the order of
attachment.7

Apropos, the trial court aptly ruled that while it is true that the word deposit cannot
only be confined or construed to refer to cash, a broader interpretation thereof is not
justified in the present case for the reason that a party seeking a stay of the
attachment under Section 5 is required to make a deposit in an amount equal to the
bond fixed by the court in the order of attachment or to the value of the property to be
attached. The proximate relation of the word "deposit" and "amount" is unmistakable in
Section 5 of Rule 57. Plainly, in construing said words, it can be safely concluded that
Section 5 requires the deposit of money as the word "amount" commonly refers to or is
regularly associated with a sum of money.

In Alcazar v. Arante,8 we held that in construing words and phrases used in a statute,
the general rule is that, in the absence of legislative intent to the contrary, they should
be given their plain, ordinary and common usage meaning. The words should be read
and considered in their natural, ordinary, commonly-accepted and most obvious
signification, according to good and approved usage and without resorting to forced or
subtle construction. Words are presumed to have been employed by the lawmaker in
their ordinary and common use and acceptation.9 Thus, petitioners should not give a
special or technical interpretation to a word which is otherwise construed in its ordinary
sense by the law and broaden the signification of the term "deposit" to include that of
real properties.
cralawred

75 | P a g e
WHEREFORE, premises considered, the instant petition is DENIED. The Decision
dated March 27, 2012 and Resolution dated September 11, 2012 of the Court of
Appeals are hereby AFFIRMED.

SO ORDERED. chanroblesvirtuallawlibrary

76 | P a g e
G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,

vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN,
and TEODORICO ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

NARVASA, J.:

Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp.
No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.,"
promulgated on May 4, 1990.   That decision nullified and set aside the writ of preliminary
1

attachment issued by the Regional Trial Court of Davao City   in Civil Case No. 19513-89 on
2

application of the plaintiff (Davao Light & Power Co.), before the service of summons on the
defendants (herein respondents Queensland Co., Inc. and Adarna).

Following is the chronology of the undisputed material facts culled from the Appellate Tribunal's
judgment of May 4, 1990.

1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a verified
complaint for recovery of a sum of money and damages against Queensland Hotel, etc. and
Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint contained an ex
parte application for a writ of preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued an
Order granting the ex parte application and fixing the attachment bond at P4,600,513.37.

3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of
attachment issued.

4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of attachment
and a copy of the attachment bond, were served on defendants Queensland and Adarna; and
pursuant to the writ, the sheriff seized properties belonging to the latter.

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the
attachment for lack of jurisdiction to issue the same because at the time the order of attachment was
promulgated (May 3, 1989) and the attachment writ issued (May 11, 1989), the Trial Court had not
yet acquired jurisdiction over the cause and over the persons of the defendants.

6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge attachment.

7. On September 19, 1989, the Trial Court issued an Order denying the motion to discharge.

77 | P a g e
This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in a
special civil action of certiorari instituted by them in the Court of Appeals. The Order was, as
aforestated, annulled by the Court of Appeals in its Decision of May 4, 1990. The Appellate Court's
decision closed with the following disposition:

. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary attachment,
dated September 19, 1989 denying the motion to discharge attachment; dated November 7,
1989 denying petitioner's motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and Notice of Levy on
Preliminary Attachment dated May 11, 1989, are hereby declared null and void and the
attachment hereby ordered DISCHARGED.

The Appellate Tribunal declared that —

. . . While it is true that a prayer for the issuance of a writ of preliminary attachment may be
included m the complaint, as is usually done, it is likewise true that the Court does not
acquire jurisdiction over the person of the defendant until he is duly summoned or voluntarily
appears, and adding the phrase that it be issued "ex parte" does not confer said jurisdiction
before actual summons had been made, nor retroact jurisdiction upon summons being
made. . . .

It went on to say, citing Sievert v. Court of Appeals,   that "in a proceedings in attachment," the 3

"critical time which must be identified is . . . when the trial court acquires authority under law to act
coercively against the defendant or his property . . .;" and that "the critical time is the of the vesting of
jurisdiction in the court over the person of the defendant in the main case."

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in the
present appellate proceedings.

The question is whether or not a writ of preliminary attachment may issue ex parte against a
defendant before acquisition of jurisdiction of the latter's person by service of summons or his
voluntary submission to the Court's authority.

The Court rules that the question must be answered in the affirmative and that consequently, the
petition for review will have to be granted.

It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction
over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction
over the person of the defendant (either by service of summons or his voluntary submission to the
court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that
the validity of acts done during this period should be defendant on, or held in suspension until, the
actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction
over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the
person of the plaintiff or over the subject-matter or nature of the action, or the res or object hereof.

An action or proceeding is commenced by the filing of the complaint or other initiatory pleading.  4 By that act,

 and it is thus that the court acquires jurisdiction over

the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5

said subject matter or nature of the action.   And it is by that self-same act of the plaintiff (or 6

petitioner) of filing the complaint (or other appropriate pleading) — by which he signifies his
submission to the court's power and authority — that jurisdiction is acquired by the court over his
person.   On the other hand, jurisdiction over the person of the defendant is obtained, as above
7

78 | P a g e
stated, by the service of summons or other coercive process upon him or by his voluntary
submission to the authority of the court.  8

The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant
in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different acts may be done by the

 the grant of authority to the plaintiff to

plaintiff or by the Court, which are unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9

prosecute the suit as a pauper litigant,   the amendment of the complaint by the plaintiff as a matter 10

of right without leave of court,   authorization by the Court of service of summons by

11

publication,   the dismissal of the action by the plaintiff on mere notice. 

12 13

 They may be validly and properly applied for and

This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. 14

granted even before the defendant is summoned or is heard from.

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional
remedy in virtue of which a plaintiff or other party may, at the commencement of the action or at any
time thereafter, have the property of the adverse party taken into the custody of the court as security
for the satisfaction of any judgment that may be recovered.   It is a remedy which is purely statutory 15

in respect of which the law requires a strict construction of the provisions granting it.   Withal no 16

principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of
jurisdiction over the person of the defendant.

Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time
thereafter."   The phase, "at the commencement of the action," obviously refers to the date of the
17

filing of the complaint — which, as above pointed out, is the date that marks "the commencement of
the action;"   and the reference plainly is to a time before summons is served on the defendant, or
18

even before summons issues. What the rule is saying quite clearly is that after an action is properly
commenced — by the filing of the complaint and the payment of all requisite docket and other fees
— the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the
pertinent requisites laid down by law, and that he may do so at any time, either before or after
service of summons on the defendant. And this indeed, has been the immemorial practice
sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for
attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-party
claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds
the application otherwise sufficient in form and substance.

In Toledo v. Burgos,   this Court ruled that a hearing on a motion or application for preliminary
19

attachment is not generally necessary unless otherwise directed by the Trial Court in its
discretion.   And in Filinvest Credit Corporation v. Relova,   the Court declared that "(n)othing in the
20 21

Rules of Court makes notice and hearing indispensable and mandatory requisites for the issuance of
a writ of attachment." The only pre-requisite is that the Court be satisfied, upon consideration of "the
affidavit of the applicant or of some other person who personally knows the facts, that a sufficient
cause of action exists, that the case is one of those mentioned in Section 1 . . . (Rule 57), that there
is no other sufficient security for the claim sought to be enforced by the action, and that the amount
due to the applicant, or the value of the property the possession of which he is entitled to recover, is
as much as the sum for which the order (of attachment) is granted above all legal counterclaims."   If 22

the court be so satisfied, the "order of attachment shall be granted,"   and the writ shall issue upon 23

the applicant's posting of "a bond executed to the adverse party in an amount to be fixed by the
judge, not exceeding the plaintiffs claim, conditioned that the latter will pay all the costs which may
be adjudged to the adverse party and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the applicant was not entitled thereto."  24

 this Court had occasion to emphasize the postulate that no

In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25

hearing is required on an application for preliminary attachment, with notice to the defendant, for the

79 | P a g e
reason that this "would defeat the objective of the remedy . . . (since the) time which such a hearing
would take, could be enough to enable the defendant to abscond or dispose of his property before a
writ of attachment issues." As observed by a former member of this Court,   such a procedure would
26

warn absconding debtors-defendants of the commencement of the suit against them and the
probable seizure of their properties, and thus give them the advantage of time to hide their assets,
leaving the creditor-plaintiff holding the proverbial empty bag; it would place the creditor-applicant in
danger of losing any security for a favorable judgment and thus give him only an illusory victory.

Withal, ample modes of recourse against a preliminary attachment are secured by law to the
defendant. The relative ease with which a preliminary attachment may be obtained is matched and
paralleled by the relative facility with which the attachment may legitimately be prevented or
frustrated. These modes of recourse against preliminary attachments granted by Rule 57 were
discussed at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc. v.
CA., supra.

That separate opinion stressed that there are two (2) ways of discharging an attachment: first, by the
posting of a counterbond; and second, by a showing of its improper or irregular issuance.

1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already

enforced against property, or even of preventing its enforcement altogether.

1.1. When property has already been seized under attachment, the attachment may be discharged
upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. — At any time after an order of
attachment has been granted, the party whose property has been attached or the person
appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who
granted the order, or to the judge of the court in which the action is pending, for an order
discharging the attachment wholly or in part on the security given . . . in an amount equal to
the value of the property attached as determined by the judge to secure the payment of any
judgment that the attaching creditor may recover in the action. . . .

1.2. But even before actual levy on property, seizure under attachment may be prevented also upon
counterbond. The defendant need not wait until his property is seized before seeking the discharge
of the attachment by a counterbond. This is made possible by Section 5 of Rule 57.

Sec. 5. Manner of attaching property. — The officer executing the order shall without delay
attach, to await judgment and execution in the action, all the properties of the party against
whom the order is issued in the province, not exempt from execution, or so much thereof as
may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with
the clerk or judge of the court from which the order issued, or gives a counter-bond executed
to the applicant, in an amount sufficient to satisfy such demand besides costs, or in an
amount equal to the value of the property which is about to be attached, to secure payment
to the applicant of any judgment which he may recover in the action. . . . (Emphasis supplied)

2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or discharged
on the ground that it has been irregularly or improperly issued, in accordance with Section 13 of Rule
57. Like the first, this second mode of lifting an attachment may be resorted to even before any
property has been levied on. Indeed, it may be availed of after property has been released from a
levy on attachment, as is made clear by said Section 13, viz.:

80 | P a g e
 Sec. 13. Discharge of attachment for improper or irregular issuance. — The party whose
property has been attached may also, at any time either BEFORE or AFTER the release of
the attached property, or before any attachment shall have been actually levied, upon
reasonable notice to the attaching creditor, apply to the judge who granted the order, or to
the judge of the court in which the action is pending, for an order to discharge the attachment
on the ground that the same was improperly or irregularly issued. If the motion be made on
affidavits on the part of the party whose property has been attached, but not otherwise, the
attaching creditor may oppose the same by counter-affidavits or other evidence in addition to
that on which the attachment was made. . . . (Emphasis supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The attachment
debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply
availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the
filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by
the attaching creditor instead of the other way, which, in most instances . . . would require
presentation of evidence in a fullblown trial on the merits, and cannot easily be settled in a pending
incident of the case."  27

 to wit:
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A., supra., 28

(a) When an attachment may not be dissolved by a showing of its irregular or improper

issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which is at the same time the
applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an officer of a corporation, or
an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by
any other person in a fiduciary capacity, or for a willful violation of duty." (Sec. 1 [b], Rule 57),
or "an action against a party who has been guilty of fraud m contracting the debt or incurring
the obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the defendant is not
allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to
show the falsity of the factual averments in the plaintiff's application and affidavits on which
the writ was based — and consequently that the writ based thereon had been improperly or
irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) — the reason being that the hearing
on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the
action. In other words, the merits of the action would be ventilated at a mere hearing of a
motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature,
the only way it can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).

(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond:

. . . The dissolution of the preliminary attachment upon security given, or a showing of its
irregular or improper issuance, does not of course operate to discharge the sureties on
plaintiff's own attachment bond. The reason is simple. That bond is "executed to the adverse
party, . . . conditioned that the . . . (applicant) will pay all the costs which may be adjudged to
the adverse party and all damages which he may sustain by reason of the attachment, if the
court shall finally adjudge that the applicant was not entitled thereto" (SEC. 4, Rule 57).
Hence, until that determination is made, as to the applicant's entitlement to the attachment,
his bond must stand and cannot be with-drawn.

81 | P a g e
With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58), receivership
(Rule 59), replevin or delivery of personal property (Rule 60), the rule is the same: they may also
issue ex parte.  29

It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant, as above indicated — issuance of summons, order of attachment and writ of attachment (and/or appointments of guardian  ad

 — and however valid and proper

litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court 30

they might otherwise be, these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by service on him of summons
or other coercive process or his voluntary submission to the court's authority. Hence, when the
sheriff or other proper officer commences implementation of the writ of attachment, it is essential that
he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of
the order of attachment, as explicity required by Section 5 of Rule 57, but also the summons
addressed to said defendant as well as a copy of the complaint and order for appointment of
guardian ad litem, if any, as also explicity directed by Section 3, Rule 14 of the Rules of Court.
Service of all such documents is indispensable not only for the acquisition of jurisdiction over the
person of the defendant, but also upon considerations of fairness, to apprise the defendant of the
complaint against him, of the issuance of a writ of preliminary attachment and the grounds therefor
and thus accord him the opportunity to prevent attachment of his property by the posting of a
counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to Section 5 (or
Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the
grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in
accordance with Section 13, Rule 57.

It was on account of the failure to comply with this fundamental requirement of service of summons
and the other documents above indicated that writs of attachment issued by the Trial Court ex
parte were struck down by this Court's Third Division in two (2) cases, namely: Sievert v. Court of
Appeals,   and BAC Manufacturing and Sales Corporation v. Court of Appeals, et al.   In contrast to
31 32

the case at bar — where the summons and a copy of the complaint, as well as the order and writ of
attachment and the attachment bond were served on the defendant — in Sievert, levy on attachment
was attempted notwithstanding that only the petition for issuance of the writ of preliminary
attachment was served on the defendant, without any prior or accompanying summons and copy of
the complaint; and in BAC Manufacturing and Sales Corporation, neither the summons nor the order
granting the preliminary attachment or the writ of attachment itself was served on the defendant
"before or at the time the levy was made."

For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of
attachment may properly issue ex parte provided that the Court is satisfied that the relevant
requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior
hearing on the application with notice to the defendant; but that levy on property pursuant to the writ
thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by
service on the defendant of summons, a copy of the complaint (and of the appointment of
guardian ad litem, if any), the application for attachment (if not incorporated in but submitted
separately from the complaint), the order of attachment, and the plaintiff's attachment bond.

WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is hereby
REVERSED, and the order and writ of attachment issued by Hon. Milagros C. Nartatez, Presiding
Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No. 19513-89 against
Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico Adarna are hereby
REINSTATED. Costs against private respondents.

SO ORDERED.

82 | P a g e
83 | P a g e
 G.R. No. 181721, September 09, 2015

WATERCRAFT VENTURE CORPORATION, REPRESENTED BY ITS VICE-

PRESIDENT, ROSARIO E. RAÑOA, Petitioner, v. ALFRED RAYMOND
WOLFE, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to
reverse and set aside the Court of Appeals (CA) Resolution1 dated January 24, 2008
denying the motion for reconsideration of its Decision2 dated September 27, 2007 in
CA-G.R. SP No. 97804.

The facts are as follows: chanRoblesvirtualLawlibrary

Petitioner Watercraft Venture Corporation (Watercraft) is engaged in the business of

building, repairing, storing and maintaining yachts, boats and other pleasure crafts at
the Subic Bay Freeport Zone, Subic, Zambales. In connection with its operations and
maintenance of boat storage facilities, it charges a boat storage fee of Two Hundred
Seventy-Two US Dollars (US$272.00) per month with interest of 4% per month for
unpaid charges.

Sometime in June 1997, Watercraft hired respondent Alfred Raymond Wolfe (Wolfe), a
British national and resident of Subic Bay Freeport Zone, Zambales, as its Shipyard
Manager.

During his empolyment, Wolfe stored the sailboat, Knotty Gull, within Watercraft1 s
boat storage facilities, but never paid for the storage fees.

On March 7, 2002, Watercraft terminated the employment of Wolfe.

Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's storage facilities
after signing a Boat Pull-Out Clearance dated June 29, 2002 where he allegedly
acknowledged the outstanding obligation of Sixteen Thousand Three Hundred and
Twenty-Four and 82/100 US Dollars (US$16,324.82) representing unpaid boat storage
fees for the period of June 1997 to June 2002. Despite repeated demands, he failed to
pay the said amount.

Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for Collection of Sum
of Money with Damages with an Application for the Issuance of a Writ of Preliminary
Attachment. The case was docketed as Civil Case No. 4534-MN, and raffled to Branch
1703 of the Regional Trial Court (RTC) of Malabon City.

In his Answer, Wolfe claimed he was hired as Service and Repair Manager, instead of
Shipyard Manager. He denied owing Watercraft the amount of US$16,324.82
representing storage fees for the sailboat. He explained that the sailboat was purchased
in February 1998 as part of an agreement between him and Watercraft1 s then General

84 | P a g e
Manager, Barry Bailey, and its President, Ricky Sandoval, for it to be repaired and used
as training or fill-in project for the staff, and to be sold later on. He added that pursuant
to a central Listing Agreement for the sale of the sailboat, he was appointed as agent,
placed in possession thereof and entitled to a ten percent (10%) sales commission. He
insisted that nowhere in the agreement was there a stipulation that berthing and
storage fees will be charged during the entire time that the sailboat was in Watercraft's
dockyard. Thus, he claimed to have been surprised when he received five (5) invoices
billing him for the said fees two (2) months after his services were terminated. Fie
pointed out that the complaint was an offshoot of an illegal dismissal case he filed
against Watercraft which had been decided in his favor by the Labor Arbiter.

Meanwhile, finding Watercraft's ex-parte application for writ of preliminary attachment

sufficient in form and in substance pursuant to Section 1 of Rule 57 of the Rules of
Court, the RTC granted the same in the Order dated July 15, 2005, thus:

WHEREFORE, let a Writ of Preliminary Attachment be issued accordingly in favor of the

plaintiff, Watercraft Ventures Corporation conditioned upon the filing of attachment
bond in the amount of  Three Million Two Hundred Thirty-One Thousand Five
Hundred and Eighty-Nine and 25/100 Pesos (Php3,231,589.25)  and the said
writ be served simultaneously with the summons, copies of the complaint, application
for attachment, applicant's affidavit and bond, and this Order upon the defendant.

SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the Writ of Attachment dated August 3,
2005 and the Notice of Attachment dated August 5, 2005 were issued, and Wolfe's two
vehicles, a gray Mercedes Benz with plate number XGJ 819 and a maroon Toyota
Corolla with plate number TFW 110, were levied upon.

On August 12, 2005, Wolfe's accounts at the Bank of the Philippine Islands were also
garnished.

By virtue of the Notice of Attachment and Levy dated September 5, 2005, a white
Dodge pick-up truck with plate number XXL 111 was also levied upon. However, a
certain Jeremy Simpson filed a Motion for Leave of Court to Intervene, claiming that he
is the owner of the truck as shown by a duly-notarized Deed of Sale executed on
August 4, 2005, the Certificate of Registration No. 3628665-1 and the Official Receipt
No. 271839105.

On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of Attachment,

arguing that Watercraft failed to show the existence of fraud and that the mere failure
to pay or perform an obligation does not amount to fraud. Me also claimed that he is
not a flight risk for the following reasons: (1) contrary to the claim that his Special
Working Visa expired in April 2005, his Special Subic Working Visa and Alien Certificate
of Registration are valid until April 25, 2007 and May 11, 2006, respectively; (2) he and
his family have been residing in the Philippines since 1997; (3) he is an existing
stockholder and officer of Wolfe Marine Corporation which is registered with the
Securities and Exchange Commission, and a consultant of "Sudeco/Ayala" projects in
Subic, a member of the Multipartite Committee for the new port development in Subic,
and the Subic Chamber of Commerce; and (4) he intends to finish prosecuting his
pending labor case against Watercraft. On even date, Watercraft also filed a Motion for

85 | P a g e
Preliminary Hearing of its affirmative defenses of forum shopping,  litis pendentia, and
laches.

In an Order dated March 20, 2006, the RTC denied Wolfe's Motion to Discharge Writ of
Attachment and Motion for Preliminary Hearing for lack of merit.

Wolfe filed a motion for reconsideration, but the RTC also denied it for lack of merit in
an Order dated November 10, 2006. Aggrieved, Wolfe filed a petition
for certiorari before the CA.

The CA granted Wolfe's petition in a Decision dated September 2007, the dispositive
portion of which reads:
WHEREFORE, the Order dated March 20, 2006 and the Order dated November 10,
2006 of respondent Judge are hereby ANNULLED and  SET ASIDE. Accordingly,
the Writ of Attachment issued on August 3, 2005, the Notice of Attachment dated
August 5, 2005 and the Notice of Attachment and Levy  dated September 5, 2005 are
hereby also declared NULL  and VOID, and private respondent is  DIRECTED to return
to their owners the vehicles that were attached pursuant to the Writ.

SO ORDERED.5
The CA ruled that the act of issuing the writ of preliminary attachment ex-
parte constitutes grave abuse of discretion on the part of the RTC, thus:
x x x In  Cosiquien  [v. Court of Appeals], the Supreme Court held that:
"Where a judge issues a fatally defective writ of preliminary attachment based
on an affidavit which failed to allege the requisites prescribed for the issuance
of the writ of preliminary attachment, renders the writ of preliminary
attachment issued against the property of the defendant fatally defective. The
judge issuing it is deemed to have acted in excess of jurisdiction. In fact, the
defect cannot even be cured by amendment. Since the attachment is a harsh and
rigorous remedy which exposed the debtor to humiliation and annoyance, the rule
authorizing its issuance must be strictly construed in favor of defendant. It is the duty
of the court before issuing the Avrit to ensure that all the requisites of the law
have been complied with. Otherwise, a judge acquires no jurisdiction to issue
the writ." (emphasis supplied)
In the instant case, the Affidavit of Merit executed by Rosario E. Rañoa, Watercraft's
Vice-President, failed to show fraudulent intent on the part of Wolfe to defraud the
company. It merely enumerated the circumstances tending to show the alleged
possibility of Wolfe's flight from the country. And upon Wolfe's filing of the Motion to
Discharge the Writ, what the respondent Judge should have done was to determine,
through a hearing, whether the allegations of fraud were true. As further held
in Cosiquien:
"When a judge issues a writ of preliminary attachment ex-parte, it is
incumbent on him, upon proper challenge of his order to determine whether or
not the same was improvidently issued. If the party against whom the writ is
prayed for squarely controverts the allegation of fraud, it is incumbent on the
applicant to prove his allegation. The burden of proving that there indeed was
fraud lies with the party making such allegation. This finds support in Section 1,
Rule 131 Rules of Court.  In this jurisdiction, fraud is never presumed." (Emphasis
supplied)

86 | P a g e
As correctly noted by Wolfe, although Sec. 1 of Rule 57 allows a party to invoke fraud
as a ground for the issuance of a writ of attachment, the Rules require that in all
averments of fraud, the circumstances constituting fraud must be stated with
particularity, pursuant to Rule 8, Section 5. The Complaint  merely stated, in paragraph
23 thereof that "For failing to pay the use [of] facilities and services in the form of boat
storage fees, the Defendant is clearly guilty of fraud which entitles the Plaintiff to a Writ
of Preliminary Attachment upon the property of the Defendant as security for the
satisfaction of any judgment herein." This allegation does not constitute fraud as
contemplated by law, fraud being the "generic term embracing all multifarious means
which human ingenuity can devise, and which are resorted to by one individual to
secure an advantage over another by false suggestions or by suppression of truth and
includes all surprise, trick, cunning, dissembling and any unfair way by which another is
cheated." In this instance, Wolfe's mere failure to pay the boat storage fees does not
necessarily amount to fraud, absent any showing that such failure was due to
[insidious] machinations and intent on his part to defraud Watercraft of the amount due
it.

As to the allegation that Wolfe is a flight risk, thereby warranting the issuance of the
writ, the same lacks merit. The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at will. As Wolfe avers, he and his
family had been staying in the Philippines since 1997, with his daughters studying at a
local school. He also claims to be an existing stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as well as a consultant of projects in the
Subic Area, a member of the Multipartite Committee for the new port development in
Subic, and a member of the Subic Chamber of Commerce. More importantly, Wolfe has
a pending labor case against Watercraft - a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to want to prosecute until its very end.
The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe would not want to leave
the country at will just because a suit for the collection of the alleged unpaid boat
storage fees has been filed against him by Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country. It is worth noting that
all visas issued by the government to foreigners staying in the Philippines have
expiration periods. These visas, however, may be renewed, subject to the requirements
of the law. In Wolfe's case, he indeed renewed his visa, as shown by  Special Working
Visa No. 05-WV-0124P issued by the Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two (2) years therefrom. Moreover,
his  Alien Certificate of Registration was valid up to May 11, 2006.

Based on the foregoing, it is therefore clear that the writ was improvidently issued. It is
well to emphasize that "[T]he rules on the issuance of a writ of attachment must be
construed strictly against the applicants. This stringency is required because the
remedy of attachment is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present, then the court which issues it
acts in excess of its jurisdiction. Thus, in this case, Watercraft failed to meet all the
requisites for the issuance of the writ. Thus, in granting the same, respondent Judge
acted with grave abuse of discretion. 6

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In a Resolution dated January 24, 2008, the CA denied Watercraft's motion for
reconsideration of its Decision, there being no new or significant issues raised in the
motion.

Dissatisfied with the CA Decision and Resolution, Watercraft filed this petition for review
on  certiorari, raising these two issues:
I.

WHETHER THE EX-PARTE  ISSUANCE OF THE PRELIMINARY ATTACHMENT BY THE

TRIAL COURT IN FAVOR OF THE PETITIONER IS VALID.

II.

WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT CONCERNING FRAUD ARE

SUFFICIENT TO WARRANT THE ISSUANCE OF A PRELIMINARY WRIT OF ATTACHMENT
BY THE TRIAL COURT IN FAVOR OF THE PETITIONER. 7
Watercraft argues that the CA erred in holding that the RTC committed grave abuse of
discretion in issuing the writ of preliminary attachment, and in finding that the affidavit
of merit only enumerated circumstances tending to show the possibility of Wolfe's flight
from the country, but failed to show fraudulent intent on his part to defraud the
company.

Stressing that its application for such writ was anchored on two (2) grounds under
Section 1,8 Rule 57, Watercraft insists that, contrary to the CA ruling, its affidavit of
merit sufficiently averred with particularity the circumstances constituting fraud as a
common element of said grounds.

Watercraft points out that its affidavit of merit shows that from 1997, soon after
Wolfe's employment as Shipyard Manager, up to 2002, when his employment was
terminated, or for a period of five (5) years, not once did he pay the cost for the use of
the company's boat storage facilities, despite knowledge of obligation and obvious
ability to pay by reason of his position.

Watercraft adds that its affidavit clearly stated that Wolfe, in an attempt to avoid
settling of his outstanding obligations to the company, signed a Boat Pull-Out Clearance
where he merely acknowledged but did not pay Sixteen Thousand Three Hundred and
Twenty-Four and 82/100 US Dollars (US$16,324.82) representing unpaid boat storage
fees for the period commencing June 1997 to June 2002. It avers that the execution of
such clearance enabled Wolfe to pull out his boat from the company storage facilities
without payment of storage fees.

Watercraft also faults the CA in finding no merit in its allegation that Wolfe is a flight
risk. It avers that he was supposed to stay and work in the country for a limited period,
and will eventually leave; that despite the fact that his wife and children reside in the
country, he can still leave with them anytime; and that his work in the country will not
prevent him from leaving, thereby defeating the purpose of the action, especially since
he had denied responsibility for his outstanding obligations. It submits that the CA
overlooked paragraph 28 of its Complaint which alleged that "[i]n support of the
foregoing allegations and the prayer for the issuance of a Writ of Preliminary
Attachment in the instant case, the Plaintiff has attached hereto the Affidavit of the

88 | P a g e
Vice-President of the Plaintiff, MS. ROSARIO E. RANOA x x x." 9

Watercraft asserts that it has sufficiently complied with the only requisites for the
issuance of the writ of preliminary attachment under Section 3, Rule 57 of the Rules of
Court,  i.e., affidavit of merit and bond of the applicant. It posits that contrary to the CA
ruling, there is no requirement that evidence must first be offered before a court can
grant such writ on the basis of Section 1 (d) of Rule 57, and that the rules only require
an affidavit showing that the case is one of those mentioned in Section 1, Rule 57. It
notes that although a party is entitled to oppose an application for the issuance of the
writ or to move for the discharge thereof by controverting the allegations of fraud, such
rule does not apply when the same allegations constituting fraud are the very facts
disputed in the main action, as in this case.

Watercraft also points out the inconsistent stance of Wolfe with regard to the ownership
and possession of the sailboat. Contrary to Wolfe's Answer that the purchase of the
sailboat was made pursuant to a three (3)-way partnership agreement between him
and its General Manager and Executive Vice-President, Barry Bailey, and its President,
Ricky Sandoval, Watercraft claims that he made a complete turnaround and exhibited
acts of sole-ownership by signing the Boat Pull-Out Clearance in order to retrieve the
sailboat. It argues that common sense and logic would dictate that he should have
invoked the existence of the partnership to answer the demand for payment of the
storage fees.

Watercraft contends that in order to pre-empt whatever action it may decide to take
with respect to the sailboat in relation to his liabilities, Wolfe accomplished in no time
the clearance that paved the way for its removal from the company's premises without
paying his outstanding obligations. It claims that such act reveals a fraudulent intent to
use the company storage facilities without payment of storage fees, and constitutes
unjust enrichment.

The petition lacks merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order

of the court where an action is pending to be levied upon the property or properties of
the defendant therein, the same to be held thereafter by the sheriff as security for the
satisfaction of whatever judgment that might be secured in the said action by the
attaching creditor against the defendant. 10 However, it should be resorted to only when
necessary and as a last remedy because it exposes the debtor to humiliation and
annoyance.11 It must be granted only on concrete and specific grounds and not merely
on general averments quoting the words of the rules.12 Since attachment is harsh,
extraordinary, and summary in nature,13 the rules on the application of a writ of
attachment must be strictly construed in favor of the defendant.

For the issuance of an ex-parte issuance of the preliminary attachment to be valid, an

affidavit of merit and an applicant's bond must be filed with the court 14  in which the
action is pending. Such bond executed to the adverse party in the amount fixed by the
court is subject to the conditions that the applicant will pay: (1) all costs which may be
adjudged to the adverse party; and (2) all damages which such party may sustain by
reason of the attachment, if the court shall finally adjudge that the applicant was not
entitled thereto.15 As to the requisite affidavit of merit, Section 3, 16  Rule 57 of the Rules

89 | P a g e
of Court states that an order of attachment shall be granted only when it appears in the
affidavit of the applicant, or of some other person who personally knows the facts:
that a sufficient cause of action exists;
ChanRoblesVirtualawlibrary

that the case is one of those mentioned in Section 117  hereof; ChanRoblesVirtualawlibrary

that there is no other sufficient security for the claim sought to be enforced by the
action; and

that the amount due to the applicant, or the value of the property the possession of
which he is entitled to recover, is as much as the sum for which the order is granted
above all legal counterclaims.
The mere filing of an affidavit reciting the facts required by Section 3, Rule 57,
however, is not enough to compel the judge to grant the writ of preliminary
attachment. Whether or not the affidavit sufficiently established facts therein stated is a
question to be determined by the court in the exercise of its discretion. 18  "The
sufficiency or insufficiency of an affidavit depends upon the amount of credit given it by
the judge, and its acceptance or rejection, upon his sound discretion." 19  Thus, in
reviewing the conflicting findings of the CA and the RTC on the pivotal issue of whether
or not Watercraft's affidavit of merit sufficiently established facts which constitute as
grounds upon which attachment may be issued under Section 1 (a) 20 and (d),21  Rule
57, the Court will examine the Affidavit of Preliminary Attachment 22  of Rosario E.
Rañoa, its Vice-President, which reiterated the following allegations in its complaint to
substantiate the application for a writ of preliminary attachment:
xxxx

4. Sometime in June 1997, the Defendant was hired as Watercraft's Shipyard Manager.

5. Soon thereafter, the Defendant placed his sailboat, the Knotty Gull, within the boat
storage facilities of Watercraft for purposes of storage and safekeeping.

6. Despite having been employed by Watercraft, the Defendant was not exempted from
paying Watercraft boat storage fees for the use of the said storage facilities.

7. By virtue of his then position and employment with Watercraft, the Defendant was
very much knowledgeable of the foregoing fact.

8. All throughout his employment with Watercraft, the Defendant used the boat storage
facilities of Watercraft for his  Knotty Gull.

9. However, all throughout the said period of his employment, the Defendant never
paid the boat storage fees in favor of the Plaintiff.

10. The Defendant's contract of employment with Watercraft was terminated on 07

March 2002.

11. [Sometime] thereafter, that is, in or about June 2002, the Defendant pulled out
the Knotty Gull  from the boat storage facilities of Watercraft.

12. Instead of settling in full his outstanding obligations concerning unpaid storage fees

90 | P a g e
before pulling our the  Knotty Gull, the Defendant signed a Boat Pull-Out Clearance
dated 29 June 2002 wherein he merely acknowledged the then outstanding balance of
Sixteen Thousand Three Hundred and Twenty-four and 82/100 US Dollars
(US$16,324.82), representing unpaid boat storage fees for the period commencing
June 1997 to June 2002, that he owed Watercraft.

13. By reason of Defendant's mere accomplishment of the said Boat Pull-Out Clearance
with acknowledgment of his outstanding obligation to Watercraft in unpaid boat storage
fees, Mr. Franz Urbanek, then the Shipyard Manager who replaced the Defendant,
contrary to company policy, rules and regulations, permitted the latter to physically pull
out his boat from the storage facilities of the Plaintiff without paying any portion of his
outstanding obligation in storage fees.

14. Several demands were then made upon the Defendant for him to settle his
outstanding obligations to the Plaintiff in unpaid storage fees but the same went
unheeded.

15. As of 02 April 2005, the outstanding obligation of the Defendant to the Plaintiff in
unpaid boat storage fees stands at Three Million Two Hundred Thirty-One Thousand
Five Hundred and Eighty-Nine and 25/100 Pesos (Php3,231,589.25) inclusive of
interest charges.

16. For failing to pay for the use [of] facilities and services—in the form of boat storage
facilities—duly enjoyed by him and for failing and refusing to fulfill his promise to pay
for the said boat storage fees, the Defendant is clearly guilty of  fraud which entitles
the Plaintiff to a  Writ of Preliminary Attachment upon the property of the Defendant as
security for the satisfaction of any judgment in its favor in accordance with the
provisions of Paragraph (d), Section 1, Rule 57 of the Rules of Court.

17. The instant case clearly falls under the said provision of law.

18. Furthermore, lawful factual and legal grounds exist which show that
the Defendant may have departed or is about to depart the country to defraud
his creditors thus rendering it imperative that a Writ of Preliminary Attachment be
issued in favor of the Plaintiff in the instant case.

19. The possibility of flight on the part of the Defendant is heightened by the existence
of the following circumstances:
a. The Special Working Visa issued in favor of the Defendant expired in April 2005; ChanRoblesVirtualawlibrary

b. The Defendant is a British national who may easily leave the country at will; ChanRoblesVirtualawlibrary

c. The Defendant has no real properties and visible, permanent business or

employment in the Philippines; and

e. The house last known to have been occupied by the Defendant is merely being
rented by him.
20. All told, the Defendant is a very serious flight risk which fact will certainly render
for naught the capacity of the Plaintiff to recover in the instant case. 23

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After a careful perusal of the foregoing; allegations, the Court agrees with the CA that
Watercraft failed to state with particularity the circumstances constituting fraud, as
required by Section 5,24 Rule 8 of the Rules of Court, and that Wolfe's mere failure to
pay the boat storage fees does not necessarily amount to fraud, absent any showing
that such failure was due to insidious machinations and intent on his part to defraud
Watercraft of the amount due it.

In Liberty Insurance Corporation v. Court of Appeals,25  the Court explained that to

constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, it
must be shown that the debtor in contracting the debt or incurring the obligation
intended to defraud the creditor. A debt is fraudulently contracted if at the time of
contracting it, the debtor has a preconceived plan or intention not to pay. "The fraud
must relate to the execution of the agreement and must have been the reason which
induced the other party into giving consent which he would not have otherwise given." 26

Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach
of the senses, usually kept secret, very unlikely to be confessed, and therefore, can
only be proved by unguarded expressions, conduct and circumstances. 27  Thus, the
applicant for a writ of preliminary attachment must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from
the debtor's mere non-payment of the debt or failure to comply with his
obligation.28 The particulars of such circumstances necessarily include the time,
persons, places and specific acts of fraud committed. 29  An affidavit which does not
contain concrete and specific grounds is inadequate to sustain the issuance of such
writ. In fact, mere general averments render the writ defective and the court that
ordered its issuance acted with grave abuse of discretion amounting to excess of
jurisdiction.30

In this case, Watercraft's Affidavit of Preliminary Attachment does not contain specific
allegations of other factual circumstances to show that Wolfe, at the time of contracting
the obligation, had a preconceived plan or intention not to pay. Neither can it be
inferred from such affidavit the particulars of why he was guilty of fraud in the
performance of such obligation. To be specific, Watercraft's following allegation is
unsupported by any particular averment of circumstances that will show why or how
such inference or conclusion was arrived at, to wit: "16. For failing to pay for the use
[of] facilities and services - in the form of boat storage facilities - duly enjoyed by him
and for failing and refusing to fulfill his promise to pay for the said boat storage fees,
the Defendant is clearly guilty of fraud x x x."31  It is not an allegation of essential facts
constituting Watercraft's causes of action, but a mere conclusion of law.

With respect to Section 1 (a),32  Rule 57, the other ground invoked by Watercraft for the
issuance of the writ of preliminary attachment, the Court finds no compelling reason to
depart from the CA's exhaustive ruling to the effect that such writ is unnecessary
because Wolfe is not a flight risk, thus:
As to the allegation that Wolfe is a (light risk, thereby warranting the issuance of the
writ, the same lacks merit. The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at will. As Wolfe avers, he and his
family had been staying in the Philippines since 1997, with his daughters studying at a
local school. He also claims to be an existing stockholder and officer of Wolfe Marine
Corporation, a SEC - registered corporation, as well as a consultant of projects in the

92 | P a g e
Subic Area, a member of the Multipartite Committee for the new port development in
Subic, and a member of the Subic Chamber of Commerce. More importantly, Wolfe has
a pending labor case against Watercraft - a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to want to prosecute until its very end.
The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe would not want to leave
the country at will just because a suit for the collection of the alleged unpaid boat
storage fees has been filed against him by Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country. It is worth noting that
all visas issued by the government to foreigner staying in the Philippines have
expiration periods. These visas, however, may be renewed, subject to the requirements
of the law. In Wolfe's case, he indeed renewed his visa, as shown by  Special Working
Visa No. 05-WV-0124P issued by the Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two (2) years therefrom. Moreover,
his  Alien Certificate of Registration was valid up to May 11, 2006.33
Meanwhile, Watercraft's reliance on Chuidian v. Sandiganbayan34  is displaced. It is well
settled that:
x x x when the preliminary attachment is issued upon a ground which is at the
same time the applicant's cause of action; e.g., "an action for money or property
embezzled or fraudulently misapplied or converted to his own use by a public officer, or
an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course
of his employment as such, or by any other person in a fiduciary capacity, or for a
willful violation of duty," or "an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the action is brought," the
defendant is not allowed to file a motion to dissolve the attachment under
Section 13 of Rule 57 by offering to show the falsity of the factual averments
in the plaintiffs application and affidavits on which the writ was based - and
consequently that the writ based thereon had been improperly or irregularly
issued - the reason being that the hearing on such a motion for dissolution of
the writ would be tantamount to a trial of the merits of the action. In other
words, the merits of the action would be ventilated at a mere hearing of a motion,
instead of at the regular trial.35

Be that as it may, the foregoing rule is not applicable in this case because when Wolfe
filed a motion to dissolve the writ of preliminary attachment, he did not offer to show
the falsity of the factual averments in Watercraft's application and affidavit on which the
writ was based. Instead, he sought the discharge of the writ on the ground that
Watercraft failed to particularly allege any circumstance amounting to fraud. No trial on
the merits of the action at a mere hearing of such motion will be had since only the
sufficiency of the factual averments in the application and affidavit of merit will be
examined in order to find out whether or not Wolfe was guilty of fraud in contracting
the debt or incurring the obligation upon which the action is brought, or in the
performance thereof.

Furthermore, the other ground upon which the writ of preliminary attachment was
issued by the RTC is not at the same time the applicant's cause of action.
Assuming arguendo that the RTC was correct in issuing such writ on the ground that

93 | P a g e
Watercraft's complaint involves an action for the recovery of a specified amount of
money or damages against a party, like Wolfe, who is about to depart from the
Philippines with intent to defraud his creditors, the Court stresses that the
circumstances36 cited in support thereof are merely allegations in support of its
application for such writ.37 Such circumstances, however, are neither the core of
Watercraft's complaint for collection of sum of money and damages, nor one of its three
(3) causes of action therein.38

All told, the CA correctly ruled that Watercraft failed to meet one of the requisites for
the issuance of a writ of preliminary attachment, i.e., that the case is one of those
mentioned in Section 1 of Rule 57, and that the RTC gravely abused its discretion in
improvidently issuing such writ. Watercraft failed to particularly state in its affidavit of
merit the circumstances constituting intent to defraud creditors on the part of Wolfe in
contracting or in the performance of his purported obligation to pay boat storage fees,
as well as to establish that he is a flight risk. Indeed, if all the requisites for granting
such writ are not present, then the court which issues it acts in excess of its
jurisdiction.39chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals

Decision dated September 27, 2007 and its Resolution dated January 24, 2008 in CA-
G.R. SP No. 97804, are AFFIRMED.

SO ORDERED. chan

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 EN BANC

G.R. Nos. 217126-27, November 10, 2015

CONCHITA CARPIO MORALES, IN HER CAPACITY AS THE

OMBUDSMAN, Petitioner, v. COURT OF APPEALS (SIXTH DIVISION) AND
JEJOMAR ERWIN S. BINAY, JR., Respondents.

DECISION

PERLAS-BERNABE, J.:

"All government is a trust, every branch of government is a trust, and immemorially

acknowledged so to be[.]"1 ChanRoblesVirtualawlibrary

The Case

Before the Court is a petition for certiorari and prohibition2 filed on March 25, 2015 by

petitioner Conchita Carpio Morales, in her capacity as the Ombudsman (Ombudsman),
through the Office of the Solicitor General (OSG), assailing: (a) the Resolution3 dated
March 16, 2015 of public respondent the Court of Appeals (CA) in CA-G.R. SP No.
139453, which granted private respondent Jejomar Erwin S. Binay, Jr.'s (Binay, Jr.)
prayer for the issuance of a temporary restraining order (TRO) against the
implementation of the Joint Order4 dated March 10, 20,15 of the Ombudsman in OMB-
C-A-15-0058 to 0063 (preventive suspension order) preventively suspending him and
several other public officers and employees of the City Government of Makati, for six
(6) months without pay; and (b) the Resolution5 dated March 20, 2015 of the CA,
ordering the Ombudsman to comment on Binay, Jr.'s petition for contempt6 in CA-G.R.
SP No. 139504.

Pursuant to the Resolution7 dated April 6, 2015, the CA issued a writ of preliminary

injunction8 (WPI) in CA-G.R. SP No. 139453 which further enjoined the implementation
of the preventive suspension order, prompting the Ombudsman to file a supplemental
petition9 on April 13, 2015.

The Facts

On July 22, 2014, a complaint/affidavit10 was filed by Atty. Renato L. Bondal and Nicolas
"Ching" Enciso VI before the Office of the Ombudsman against Binay, Jr. and other
public officers and employees of the City Government of Makati (Binay, Jr.,  et al),
accusing them of Plunder11 and violation of Republic Act No. (RA) 3019,12 otherwise
known as "The Anti-Graft and Corrupt Practices Act," in connection with the five (5)
phases of the procurement and construction of the Makati City Hall Parking Building
(Makati Parking Building).13

On September 9, 2014, the Ombudsman constituted a Special Panel of

Investigators14 to conduct a fact-finding investigation, submit an investigation report,
and file the necessary complaint, if warranted (1st Special Panel).15 Pursuant to the

95 | P a g e
Ombudsman's directive, on March 5, 2015, the 1st Special Panel filed a
complaint16 (OMB Complaint) against Binay, Jr., et al, charging them with six (6)
administrative cases17 for Grave Misconduct, Serious Dishonesty, and Conduct
Prejudicial to the Best Interest of the Service, and six (6) criminal cases18 for violation
of Section 3 (e) of RA 3019, Malversation of Public Funds, and Falsification of Public
Documents (OMB Cases).19

As to Binay, Jr., the OMB Complaint alleged that he was involved in anomalous
activities attending the following procurement and construction phases of the Makati
Parking Building project, committed during his previous and present terms as City
Mayor of Makati:

Binay, Jr.'s First Term (2010 to 2013)20

(a) On September 21, 2010, Binay, Jr. issued the Notice of Award21 for Phase III of
the Makati Parking Building project to Hilmarc's Construction Corporation (Hilmarc's),
and consequently, executed the corresponding contract22 on September 28,
2010,23 without the required publication and the lack of architectural design,24 and
approved the release of funds therefor in the following amounts as follows: (1)
P130,518,394.80 on December 15, 2010;25 (2) P134,470,659.64 on January 19,
2011;26 (3) P92,775,202.27 on February 25, 2011;27 (4) P57,148,625.51 on March
28, 2011;28 (5) P40,908,750.61 on May 3, 2011;29 and (6) P106,672,761.90 on July
7, 2011;30

(b) On August 11, 2011, Binay, Jr. issued the Notice of Award31 for Phase IV of the
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract32 on August 18, 2011,33 without the required publication and the
lack of architectural design,34 and approved the release of funds therefor in the
following amounts as follows: (1) P182,325,538.97 on October 4, 2O11;35 (2)
P173,132,606.91 on October 28,2011;36 (3) P80,408,735.20 on December 12,
2011;37 (4) P62,878,291.81 on February 10, 2012;38 and (5) P59,639,167.90 on
October 1, 2012;39

(c) On September 6, 2012, Binay, Jr. issued the Notice of Award40 for Phase V of the
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract41 on September 13, 2012,42 without the required publication and
the lack of architectural design,43 and approved the release of the funds therefor in the
amounts of P32,398,220.0544 and P30,582,629.3045 on December 20, 2012;  and

Binay, Jr.'s Second Term (2013 to 2016)46

(d) On July 3, 2013 and July 4, 2013, Binay, Jr. approved the release of funds for the
remaining balance of the September 13, 2012 contract with Hilmarc's for Phase V of the
Makati Parking Building project in the amount of P27,443,629.97;47 and

(e) On July 24, 2013, Binay, Jr. approved the release of funds for the remaining
balance of the contract48 with MANA Architecture & Interior Design Co. (MANA) for the
design and architectural services covering the Makati Parking Building project in the
amount of P429,011.48.49

On March 6, 2015, the Ombudsman created another Special Panel of Investigators to

96 | P a g e
conduct a preliminary investigation and administrative adjudication on the OMB Cases
(2nd Special Panel).50 Thereafter, on March 9, 2015, the 2nd Special Panel issued
separate orders51 for each of the OMB Cases, requiring Binay, Jr., et al. to file their
respective counter-affidavits.52

Before Binay, Jr.,  et al.'s filing of their counter-affidavits, the Ombudsman, upon the
recommendation of the 2nd Special Panel, issued on March 10, 2015, the subject
preventive suspension order, placing Binay, Jr.,  et al. under preventive suspension for
not more than six (6) months without pay, during the pendency of the OMB
Cases.53 The Ombudsman ruled that the requisites for the preventive suspension of a
public officer are present,54 finding that: (a) the evidence of Binay, Jr., et al.'s guilt was
strong given that (1) the losing bidders and members of the Bids and Awards
Committee of Makati City had attested to the irregularities attending the Makati Parking
Building project; (2) the documents on record negated the publication of bids; and (3)
the disbursement vouchers, checks, and official receipts showed the release of funds;
and (b) (1) Binay, Jr., et al. were administratively charged with Grave Misconduct,
Serious Dishonesty, and Conduct Prejudicial to the Best Interest of the Service; (2) said
charges, if proven to be true, warrant removal from public service under the Revised
Rules on Administrative Cases in the Civil Service (RRACCS), and (3) Binay, Jr., et al.'s
respective positions give them access to public records and allow them to influence
possible witnesses; hence, their continued stay in office may prejudice the investigation
relative to the OMB Cases filed against them.55 Consequently, the Ombudsman directed
the Department of Interior and Local Government (DILG), through Secretary Manuel A.
Roxas II (Secretary Roxas), to immediately implement the preventive suspension order
against Binay, Jr., et al., upon receipt of the same.56

On March 11, 2015, a copy of the preventive suspension order was sent to the Office of
the City Mayor, and received by Maricon Ausan, a member of Binay, Jr.'s staff.57

The Proceedings Before the CA

On even date,58 Binay, Jr. filed a petition for certiorari59 before the CA, docketed as CA-
G.R. SP No. 139453, seeking the nullification of the preventive suspension order, and
praying for the issuance of a TRO and/or WPI to enjoin its implementation.60Primarily,
Binay, Jr. argued that he could not be held administratively liable for any
anomalous activity attending any of the five (5) phases of the Makati Parking Building
project since: (a) Phases I and II were undertaken before he was elected Mayor of
Makati in 2010; and (b) Phases III to V transpired during his first term and that his re-
election as City Mayor of Makati for a second term effectively condoned his
administrative liability therefor, if any, thus rendering the administrative cases
against him moot and academic.61In any event, Binay, Jr. claimed that the
Ombudsman's preventive suspension order failed to show that the evidence of
guilt presented against him is strong, maintaining that he did not participate in any
of the purported irregularities.62 In support of his prayer for injunctive relief, Binay, Jr.
argued that he has a clear and unmistakable right to hold public office, having won by
landslide vote in the 2010 and 2013 elections, and that, in view of the condonation
doctrine, as well as the lack of evidence to sustain the charges against him, his
suspension from office would undeservedly deprive the electorate of the services of the
person they have conscientiously chosen and voted into office.63

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On March 16, 2015, at around 8:24 a.m., Secretary Roxas caused the implementation
of the preventive suspension order through the DILG National Capital Region - Regional
Director, Renato L. Brion, CESO III (Director Brion), who posted a copy thereof on the
wall of the Makati City Hall after failing to personally serve the same on Binay, Jr. as
the points of entry to the Makati City Hall were closed. At around 9:47 a.m., Assistant
City Prosecutor of Makati Billy C. Evangelista administered the oath of office on Makati
City Vice Mayor Romulo V. Peña, Jr. (Peña, Jr.) who thereupon assumed office as Acting
Mayor.64

At noon of the same day, the CA issued a Resolution65 (dated March 16, 2015), granting
Binay, Jr.'s prayer for a TRO,66 notwithstanding Pena, Jr.'s assumption of duties as
Acting Mayor earlier that day.67 Citing the case of Governor Garcia, Jr. v. CA,68 the CA
found that it was more prudent on its part to issue a TRO in view of the extreme
urgency of the matter and seriousness of the issues raised, considering that if it were
established that the acts subject of the administrative cases against Binay, Jr. were all
committed during his prior term, then, applying the condonation doctrine, Binay, Jr.'s
re-election meant that he can no longer be administratively charged.69 The CA then
directed the Ombudsman to comment on Binay, Jr.'s petition for certiorari .70

On March 17, 2015, the Ombudsman manifested71 that the TRO did not state what act
was being restrained and that since the preventive suspension order had already been
served and implemented, there was no longer any act to restrain.72

On the same day, Binay, Jr. filed a petition for contempt,73  docketed as CA-G.R. SP
No. 139504, accusing Secretary Roxas, Director Brion, the officials of the Philippine
National Police, and Pena, Jr. of deliberately refusing to obey the CA, thereby allegedly
impeding, obstructing, or degrading the administration of justice.74 The Ombudsman
and Department of Justice Secretary Leila M. De Lima were subsequently impleaded as
additional respondents upon Binay, Jr.'s filing of the amended and supplemental
petition for contempt75 (petition for contempt) on March 19, 2015.76 Among others,
Binay, Jr. accused the Ombudsman and other respondents therein for willfully and
maliciously ignoring the TRO issued by the CA against the preventive suspension
order.77

In a Resolution78dated March 20, 2015, the CA ordered the consolidation of CA-G.R.

SP No. 139453 and CA-G.R. SP No. 139504, and, without necessarily giving due
course to Binay, Jr.'s petition for contempt, directed the Ombudsman to file her
comment thereto.79 The cases were set for hearing of oral arguments on March 30 and
31, 2015.80

The Proceedings Before the Court

Prior to the hearing of the oral arguments before the CA, or on March 25, 2015, the
Ombudsman filed the present petition before this Court, assailing the CA's March 16,
2015 Resolution, which granted Binay, Jr.'s prayer for TRO in CA-G.R. SP No. 139453,
and the March 20, 2015 Resolution directing her to file a comment on Binay, Jr.'s
petition for contempt in CA-G.R. SP No. 139504.81 The Ombudsman claims that: (a) the
CA had no jurisdiction to grant Binay, Jr.'s prayer for a TRO, citing Section 14 of RA
6770,82 or "The Ombudsman Act of 1989," which states that no injunctive writ could be
issued to delay the Ombudsman's investigation unless there is prima facie evidence

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that the subject matter thereof is outside the latter's jurisdiction;83 and (b) the CA's
directive for the Ombudsman to comment on Binay, Jr.'s petition for contempt is illegal
and improper, considering that the Ombudsman is an impeachable officer, and
therefore, cannot be subjected to contempt proceedings.84

In his comment85 filed on April 6, 2015, Binay, Jr. argues that Section 1, Article VIII of
the 1987 Constitution specifically grants the CA judicial power to review acts of any
branch or instrumentality of government, including the Office of the Ombudsman, in
case of grave abuse of discretion amounting to lack or excess of jurisdiction, which he
asserts was committed in this case when said office issued the preventive suspension
order against him.86 Binay, Jr. posits that it was incumbent upon the Ombudsman to1
have been apprised of the condonation doctrine as this would have weighed heavily in
determining whether there was strong evidence to warrant the issuance of the
preventive suspension order.87 In this relation, Binay, Jr. maintains that the CA
correctly enjoined the implementation of the preventive suspension order given his
clear and unmistakable right to public office, and that it is clear that he could not be
held administratively liable for any of the charges against him since his subsequent re-
election in 2013 operated as a condonation of any administrative offenses he may have
committed during his previous term.88 As regards the CA's order for the Ombudsman to
comment on his petition for contempt, Binay, Jr. submits that while the Ombudsman is
indeed an impeachable officer and, hence, cannot be removed from office except by
way of impeachment, an action for contempt imposes the penalty of fine and
imprisonment, without necessarily resulting in removal from office. Thus, the fact that
the Ombudsman is an impeachable officer should not deprive the CA of its inherent
power to punish contempt.89

Meanwhile, the CA issued a Resolution90 dated April 6, 2015, after the oral

arguments before it were held,91 granting Binay, Jr.'s prayer for a WPI, which further
enjoined the implementation of the preventive suspension order. In so ruling, the CA
found that Binay, Jr. has an ostensible right to the final relief prayed for, namely, the
nullification of the preventive suspension order, in view of the condonation doctrine,
citing Aguinaldo v. Santos.92 Particularly, it found that the Ombudsman can hardly
impose preventive suspension against Binay, Jr. given that his re-election in 2013 as
City Mayor of Makati condoned any administrative liability arising from anomalous
activities relative to the Makati Parking Building project from 2007 to 2013.93 In this
regard, the CA added that, although there were acts which were apparently committed
by Binay, Jr. beyond his first term — namely, the alleged payments on July 3, July 4,
and July 24, 2013,94 corresponding to the services of Hillmarc's and MANA - still, Binay,
Jr. cannot be held administratively liable therefor based on the cases of Salalima v.
Guingona, Jr.,95 and Mayor Garcia v. Mojica96 wherein the condonation doctrine was
still applied by the Court although the payments were made after the official's re-
election, reasoning that the payments were merely effected pursuant to contracts
executed before said re-election.97 To this, the CA added that there was no concrete
evidence of Binay, Jr.'s participation for the alleged payments made on July 3, 4, and
24, 2013.98

In view of the CA's supervening issuance of a WPI pursuant to its April 6, 2015
Resolution, the Ombudsman filed a supplemental petition99 before this Court, arguing
that the condonation doctrine is irrelevant to the determination of whether the evidence
of guilt is strong for purposes of issuing preventive suspension orders. The Ombudsman

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also maintained that a reliance on the condonation doctrine is a matter of defense,
which should have been raised by Binay, Jr. before it during the administrative
proceedings, and that, at any rate, there is no condonation because Binay, Jr.
committed acts subject of the OMB Complaint after his re-election in 2013.100

On April 14 and 21, 2015,101 the Court conducted hearings for the oral arguments of the
parties. Thereafter, they were required to file their respective memoranda.102 In
compliance thereto, the Ombudsman filed her Memorandum103 on May 20, 2015, while
Binay, Jr. submitted his Memorandum the following day.104

Pursuant to a Resolution105 dated June 16, 2015, the Court directed the parties to
comment on each other's memoranda, and the OSG to comment on the Ombudsman's
Memorandum, all within ten (10) days from receipt of the notice.

On July 15, 2015, both parties filed their respective comments to each other's
memoranda.106 Meanwhile, on July 16, 2015, the OSG filed its Manifestation In Lieu of
Comment,107 simply stating that it was mutually agreed upon that the Office of the
Ombudsman would file its Memorandum, consistent with its desire to state its
"institutional position."108 In her Memorandum and Comment to Binay, Jr.'s
Memorandum, the Ombudsman pleaded, among others, that this Court abandon the
condonation doctrine.109 In view of the foregoing, the case was deemed submitted for
resolution. chanrobleslaw

The Issues Before the Court

Based on the parties' respective pleadings, and as raised during the oral arguments
conducted before this Court, the main issues to be resolved in seriatim are as follows:

I. Whether or not the present petition, and not motions for reconsideration
of the assailed CA issuances in CA-G.R. SP No. 139453 and CA-G.R. SP
No. 139504, is the Ombudsman's plain, speedy, and adequate remedy; cralawlawlibrary

II. Whether or not the CA has subject matter jurisdiction over the main
petition for certiorari in CA-G.R. SP No. 139453; cralawlawlibrary

III. Whether or not the CA has subject matter jurisdiction to issue a TRO
and/or WPI enjoining the implementation of a preventive suspension
order issued by the Ombudsman; cralawlawlibrary

IV. Whether or not the CA gravely abused its discretion in issuing the TRO
and eventually, the WPI in CA-G.R. SP No. 139453 enjoining the
implementation of the preventive suspension order against Binay, Jr.
based on the condonation doctrine; and
V. Whether or not the CA's directive for the Ombudsman to ' comment on
Binay, Jr.'s petition for contempt in CA- G.R. SP No. 139504 is improper
and illegal.

The Ruling of the Court

The petition is partly meritorious. chanrobleslaw

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 I.

A common requirement to both a petition for certiorari and a petition for prohibition

taken under Rule 65 of the 1997 Rules of Civil Procedure is that the petitioner has no
other plain, speedy, and adequate remedy in the ordinary course of law. Sections 1 and
2 thereof provide:

Section 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, nor any plain, speedy, and adequate remedy in the ordinary course
of law, a person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

xxxx

Section 2. Petition for prohibition. - When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any
other plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts r with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter specified therein,
or otherwise granting such incidental reliefs as law and justice may require.

x x x x (Emphases supplied)

Hence, as a general rule, a motion for reconsideration must first be filed with the lower
court prior to resorting to the extraordinary remedy of certiorari or prohibition since a
motion for reconsideration may still be considered as a plain, speedy, and adequate
remedy in the ordinary course of law. The rationale for the pre-requisite is to grant an
opportunity for the lower court or agency to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of the
case.110

Jurisprudence states that "[i]t is [the] inadequacy, [and] not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must
usually determine the propriety of certiorari [or prohibition]. A remedy is plain,
speedy[,] and adequate if it will promptly relieve the petitioner from the injurious
effects of the judgment, order, or resolution of the lower court or agency, x x x."111

In this light, certain exceptions were crafted to the general rule requiring a prior motion
for reconsideration before the filing of a petition for certiorari, which exceptions also
apply to a petition for prohibition.112 These are: (a) where the order is a patent nullity,
as where the court a quo has no jurisdiction; (b) where the questions raised in
the certiorari proceedings have been duly raised and passed upon by the lower court, or
are the same as those raised and passed upon in the lower court; (c) where there is an

101 | P a g e
urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of
the action is perishable; (d) where, under the circumstances, a motion for
reconsideration would be useless; (e) where petitioner was deprived of due process and
there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of
arrest is urgent and the granting of such relief by the trial court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where
the proceedings were ex parte  or in which the petitioner had no opportunity to object;
and (i) where the issue raised is one purely of law or where public interest is
involved.113

In this case, it is ineluctably clear that the above-highlighted exceptions attend since,
for the first time, the question on the authority of the CA - and of this Court, for that
matter - to enjoin the implementation of a preventive suspension order issued by the
Office of the Ombudsman is put to the fore. This case tests the constitutional and
statutory limits of the fundamental powers of key government institutions - namely, the
Office of the Ombudsman, the Legislature, and the Judiciary - and hence, involves an
issue of transcendental public importance that demands no less than a careful but
expeditious resolution. Also raised is the equally important issue on the propriety of the
continuous application of the condonation doctrine as invoked by a public officer who
desires exculpation from administrative liability. As such, the Ombudsman's direct
resort to certiorari and prohibition before this Court, notwithstanding her failure to
move for the prior reconsideration of the assailed issuances in CA-G.R. SP No. 139453
and CA-G.R. SP No. 139504 before the CA, is justified. chanrobleslaw

II.

Albeit raised for the first time by the Ombudsman in her Memorandum,114 it is
nonetheless proper to resolve the issue on the CA's lack of subject matter jurisdiction
over the main petition for certiorari in CA-G.R. SP No. 139453, in view of the well-
established rule that a court's jurisdiction over the subject matter may be raised at any
stage of the proceedings. The rationale is that subject matter jurisdiction is conferred
by law, and the lack of it affects the very authority of the court to take cognizance of
and to render judgment on the action.115 Hence, it should be preliminarily determined if
the CA indeed had subject matter jurisdiction over the main CA-G.R. SP No. 139453
petition, as the same determines the validity of all subsequent proceedings relative
thereto. It is noteworthy to point out that Binay, Jr. was given the opportunity by this
Court to be heard on this issue,116 as he, in fact, duly submitted his opposition through
his comment to the Ombudsman's Memorandum.117 That being said, the Court
perceives no reasonable objection against ruling on this issue.

The Ombudsman's argument against the CA's lack of subject matter jurisdiction over
the main petition, and her corollary prayer for its dismissal, is based on her
interpretation of Section 14, RA 6770, or the Ombudsman Act,118 which reads in full:

Section 14. Restrictions. - No writ of injunction shall be issued by any court to delay an
investigation being conducted by the Ombudsman under this Act, unless there is
a prima facie evidence that the subject matter of the investigation is outside the
jurisdiction of the Office of the Ombudsman.

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No court shall hear any appeal or application for remedy against the decision or findings
of the Ombudsman, except the Supreme Court, on pure question of law.

The subject provision may be dissected into two (2) parts.

The first paragraph of Section 14, RA 6770 is a prohibition against any court

(except the Supreme Court119) from issuing a writ of injunction to delay an investigation
being conducted by the Office of the Ombudsman. Generally speaking, "[injunction is a
judicial writ, process or proceeding whereby a party is ordered to do or refrain from
doing a certain act. It may be the main action or merely a provisional remedy for and
as an incident in the main action."120 Considering the textual qualifier "to delay," which
connotes a suspension of an action while the main case remains pending, the "writ of
injunction" mentioned in this paragraph could only refer to injunctions of the provisional
kind, consistent with the nature of a provisional injunctive relief.

The exception to the no injunction policy is when there is prima facie evidence that the
subject matter of the investigation is outside the office's jurisdiction. The Office of the
Ombudsman has disciplinary authority over all elective and appointive officials of the
government and its subdivisions, instrumentalities, and agencies, with the exception
only of impeachable officers, Members of Congress, and the Judiciary.121 Nonetheless,
the Ombudsman retains the power to investigate any serious misconduct in office
allegedly committed by officials removable by impeachment, for the purpose of filing a
verified complaint for impeachment, if warranted.122 Note that the Ombudsman has
concurrent jurisdiction over certain administrative cases which are within the
jurisdiction of the regular courts or administrative agencies, but has primary jurisdiction
to investigate any act or omission of a public officer or employee who is under the
jurisdiction of the Sandiganbayan.123

On the other hand, the second paragraph of Section 14, RA 6770 provides that no

appeal or application for remedy may be heard against the decision or findings of the
Ombudsman, with the exception of the Supreme Court on pure questions of law. This
paragraph, which the Ombudsman particularly relies on in arguing that the CA had no
jurisdiction over the main CA-G.R. SP No. 139453 petition, as it is supposedly this Court
which has the sole jurisdiction to conduct a judicial review of its decisions or findings, is
vague for two (2) reasons: (1) it is unclear what the phrase "application for remedy" or
the word "findings" refers to; and (2) it does not specify what procedural remedy is
solely allowable to this Court, save that the same be taken only against a pure question
of law. The task then, is to apply the relevant principles of statutory construction to
resolve the ambiguity.

"The underlying principle of all construction is that the intent of the legislature should
be sought in the words employed to express it, and that when found[,] it should be
made to govern, x x x. If the words of the law seem to be of doubtful import, it may
then perhaps become necessary to look beyond them in order to ascertain what was in
the legislative mind at the time the law was enacted; what the circumstances were,
under which the action was taken; what evil, if any, was meant to be redressed; x x x
[a]nd where the law has contemporaneously been put into operation, and in doing so a
construction has necessarily been put upon it, this construction, especially if followed
for some considerable period, is entitled to great respect, as being very probably a true
expression of the legislative purpose, and is not lightly to be overruled, although it is

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not conclusive."124

As an aid to construction, courts may avail themselves of the actual proceedings of the
legislative body in interpreting a statute of doubtful meaning. In case of doubt as to
what a provision of a statute means, the meaning put to the provision during the
legislative deliberations may be adopted,125 albeit not controlling in the interpretation of
the law.126

A. The Senate deliberations cited by the

Ombudsman do not pertain to the second
paragraph of Section 14, RA 6770.

The Ombudsman submits that the legislative intent behind Section 14, RA 6770,
particularly on the matter of judicial review of her office's decisions or findings, is
supposedly clear from the following Senate deliberations:127

Senator [Edgardo J.] Angara, x x x. On page 15, Mr. President, line 14, after the
phrase "petition for" delete the word "review" and in lieu thereof, insert the
word CERTIORARI. So that, review or appeal from the decision of the Ombudsman
would only be taken not on a petition for review, but on certiorari.

The President [Jovito R. Salonga]. What is the practical effect of that? Will it

be more difficult to reverse the decision under review?

Senator Angara. It has two practical effect ways, Mr. President. First is that the
findings of facts of the Ombudsman would be almost conclusive if supported
by substantial evidence. Second, we would not unnecessarily clog the docket
of the Supreme Court. So, it in effect will be a  very strict appeal procedure.

xxxx

Senator [Teofisto T.] Guingona, [Jr.]. Does this mean that, for example, if there are
exhaustive remedies available to a respondent, the respondent himself has the right to
exhaust the administrative remedies available to him?

Senator Angara. Yes, Mr. President, that is correct.

Senator Guingona. And he himself may cut the proceeding short by appealing to
the Supreme Court only on  certiorari  ?

Senator Angara. On question of law, yes.

Senator Guingona. And no other remedy is available to him?

Senator Angara. Going to the Supreme Court, Mr. President?

Senator Guingona. Yes. What I mean to say is, at what stage, for example, if he is a
presidential appointee who is the respondent, if there is f no certiorari available, is the
respondent given the right to exhaust his administrative remedies first before the
Ombudsman can take the appropriate action?

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Senator Angara. Yes, Mr. President, because we do not intend to change the
administrative law principle that before one can go to court, he must exhaust all
administrative remedies xxx available to him before he goes and seeks judicial review.

xxxx

Senator [Neptali A.] Gonzales. What is the purpose of the Committee in

changing the method of appeal from one of a petition for review to a petition
for certiorari  ?

Senator Angara. To make it consistent, Mr. President, with the provision here
in the bill to the effect that the  finding of facts of the Ombudsman is
conclusive if supported by substantial evidence.

Senator Gonzales. A statement has been made by the Honorable Presiding Officer to
which I concur, that in an appeal by certiorari  , the appeal is more difficult.
Because in certiorari  it is a matter of discretion on the part of the court,
whether to give due course to the petition or dismiss it outright. Is that not
correct, Mr. President?

Senator Angara. That is absolutely correct, Mr. President

Senator Gonzales. And in a petition for certiorari  , the issue is  limited to

whether or not the Ombudsman here has acted without jurisdiction and has
committed a grave abuse of discretion amounting to lack of jurisdiction. Is that
not the consequence, Mr. President.

Senator Angara. That is correct, Mr. President.

Senator Gonzales. And it is, therefore, in this sense that the intention of the
Committee is to make it harder to have a judicial review, but should be limited
only to cases that I have enumerated.

Senator Angara. Yes, Mr. President.

Senator Gonzales. I think, Mr. President, our Supreme Court has made a distinction
between a petition for review and a petition for certiorari ; because before, under the
1935 Constitution appeal from any order, ruling or decision of the COMELEC shall be by
means of review. But under the Constitution it is now by certiorari and the Supreme
Court said that by this change, the court exercising judicial review will not inquire into
the facts, into the evidence, because we will not go deeply by way of review into the
evidence on record but its authority will be limited to a determination of whether the
administrative agency acted without, or in excess of, jurisdiction, or committed a grave
abuse of discretion. So, I assume that that is the purpose of this amendment, Mr.
President.

Senator Angara. The distinguished Gentleman has stated it so well.

Senator Gonzales. I just want to put that in the Record. Senator Angara. It is very

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well stated, Mr. President.

xxxx

The President.  It is evident that there must be some final authority to render
decisions. Should it be the Ombudsman or should it be the Supreme Court?

Senator Angara. As I understand it, under our scheme of government, Mr.

President, it is and has to be the Supreme Court to make the final
determination.

The President. Then if that is so, we have to modify Section 17.

Senator Angara. That is why, Mr. President, some of our Colleagues have made a
reservation to introduce an appropriate change during the period of Individual
Amendments.

xxxx

The President. All right. Is there any objection to the amendment inserting the
word CERTIORARI instead of "review"? [Silence] Hearing none, the same is approved.128

Upon an assiduous scrutiny of these deliberations, the Court is, however, unconvinced
that the provision debated on was Section 14, RA 6770, as the Ombudsman invokes.
Note that the exchange begins with the suggestion of Senator Angara to delete the
word "review" that comes after the phrase "petition for review" and, in its stead, insert
the word "certiorari" so that the "review or appeal from the decision of the Ombudsman
would not only be taken on a petition for review, but on certiorari" The ensuing
exchange between Senators Gonzales and Angara then dwells on the purpose of
changing the method of review from one of a petition for review to a petition
for certiorari - that is, to make "the appeal x x x more difficult." Ultimately, the
amendment to the change in wording, from "petition for review" to "petition
for certiorari" was approved.

Noticeably, these references to a "petition for review" and the proposed "petition
for certiorari" are nowhere to be found in the text of Section 14, RA 6770. In fact, it
was earlier mentioned that this provision, particularly its second paragraph, does not
indicate what specific procedural remedy one should take in assailing a decision or
finding of the Ombudsman; it only reveals that the remedy be taken to this Court based
on pure questions of law. More so, it was even commented upon during the oral
arguments of this case129 that there was no debate or clarification made on the current
formulation of the second paragraph of Section 14, RA 6770 per the available excerpts
of the Senate deliberations. In any case, at least for the above-cited deliberations, the
Court finds no adequate support to sustain the Ombudsman's entreaty that the CA had
no subject matter jurisdiction over the main CA-G.R. SP No. 139453 petition.

On the contrary, it actually makes greater sense to posit that these deliberations refer
to another Ombudsman Act provision, namely Section 27, RA 6770. This is because the
latter textually reflects the approval of Senator Angara's suggested amendment, i.e.,
that the Ombudsman's decision or finding may be assailed in a petition for certiorari to

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this Court (fourth paragraph), and further, his comment on the conclusive nature of the
factual findings of the Ombudsman, if supported by substantial evidence (third
paragraph):

Section 27. Effectivity and Finality of Decisions.— (1) All provisionary orders of the

Office of the Ombudsman are immediately effective and executory.

A motion for reconsideration of any order, directive or decision of the Office of the
Ombudsman must be filed within five (5) days after receipt of written notice and shall
be entertained only on any of the following grounds: chanRoblesvirtualLawlibrary

(1) New evidence has been discovered which materially affects the order, directive or
decision; cralawlawlibrary

(2) Errors of law or irregularities have been committed prejudicial to the interest of the
movant. The motion for reconsideration shall be resolved within three (3) days from
filing: Provided, That only one motion for reconsideration shall be entertained. ChanRoblesVirtualawlibrary

Findings of fact by the Office of the Ombudsman when supported by substantial

evidence are conclusive. Any order, directive or decision imposing the penalty of public
censure or reprimand, suspension of not more than one (1) month's salary shall be final
and unappealable.

In all administrative disciplinary cases, orders, directives, or decisions of the

Office of the Ombudsman may be appealed to the Supreme Court by filing
a petition for certiorari within ten (10) days from receipt of the written notice
of the order, directive or decision or denial of the motion for reconsideration in
accordance with Rule 45 of the Rules of Court.

The above rules may be amended or modified by the Office of the ' Ombudsman as the
interest of justice may require. (Emphasis and underscoring supplied)

At first blush, it appears that Section 27, RA 6770 is equally ambiguous in stating that a
"petition for certiorari" should be taken in accordance with Rule 45 of the Rules of
Court, as it is well-known that under the present 1997 Rules of Civil Procedure,
petitions for certiorari are governed by Rule 65 of the said Rules. However, it should be
discerned that the Ombudsman Act was passed way back in 1989130 and, hence, before
the advent of the 1997 Rules of Civil Procedure.131 At that time, the governing 1964
Rules of Court,132 consistent with Section 27, RA 6770, referred to the appeal taken
thereunder as a petition for certiorari , thus possibly explaining the remedy's textual
denomination, at least in the provision's final approved version:

RULE 45
Appeal from Court of Appeals to Supreme Court

SECTION 1. Filing of Petition with Supreme Court. - A party may appeal by certiorari ,
from a judgment of the Court of Appeals, by filing with the Supreme Court a petition
for certiorari  , within fifteen (15) days from notice of judgment or of the denial of his
motion for reconsideration filed in due time, and paying at the same time, to the clerk
of said court the corresponding docketing fee. The petition shall not be acted upon
without proof of service of a copy thereof to the Court of Appeals. (Emphasis supplied)

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B. Construing the second paragraph of
Section 14, RA 6770.

The Senate deliberations' lack of discussion on the second paragraph of Section 14, RA
6770 notwithstanding, the other principles of statutory construction can apply to
ascertain the meaning of the provision.

To recount, the second paragraph of Section 14, RA 6770 states that "[n]o court shall
hear any appeal or application for remedy against the decision or findings of
the Ombudsman, except the Supreme Court, on pure question of law."    ; cralawlawlibrary

As a general rule, the second paragraph of Section 14, RA 6770 bans the whole
range of remedies against issuances of the Ombudsman, by prohibiting: (a) an
appeal against any decision or finding of the Ombudsman, and (b) "any application of
remedy" (subject to the exception below) against the same. To clarify, the phrase
"application for remedy," being a generally worded provision, and being separated from
the term "appeal" by the disjunctive "or",133 refers to any remedy (whether taken
mainly or provisionally), except an appeal, following the maxim generalia verba sunt
generaliter intelligenda: general words are to be understood in a general sense.134 By
the same principle, the word "findings," which is also separated from the word
"decision" by the disjunctive "or", would therefore refer to any finding made by the
Ombudsman (whether final or provisional), except a decision.

The subject provision, however, crafts an exception to the foregoing general rule.
While the specific procedural vehicle is not explicit from its text, it is fairly deducible
that the second paragraph of Section 14, RA 6770 excepts, as the only allowable
remedy against "the decision or findings of the Ombudsman," a Rule 45 appeal, for
the reason that it is the only remedy taken to the Supreme Court on "pure
questions of law," whether under the 1964 Rules of Court or the 1997 Rules of Civil
Procedure:

Rule 45, 1964 Rules of Court

RULE 45
Appeal from Court of Appeals to Supreme Court

xxxx

Section 2. Contents of Petition. — The petition shall contain a concise statement of the
matters involved, the assignment of errors made in the court below, and the reasons
relied on for the allowance of the petition, and it should be accompanied with a true
copy of the judgment sought to be reviewed, together with twelve (12) copies of the
record on appeal, if any, and of the petitioner's brief as filed in the Court of Appeals. A
verified statement of the date when notice of judgment and denial of the motion for
reconsideration, if any, were received shall accompany the petition.

Only questions of law may be raised in the petition and must be distinctly set
forth. If no record on appeal has been filed in the Court of Appeals, the clerk of the

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Supreme Court, upon admission of the petition, shall demand from the Court of Appeals
the elevation of the whole record of the case. (Emphasis and underscoring supplied)

Rule 45, 1997 Rules of Civil Procedure

RULE 45
Appeal by Certiorari to the Supreme Court

Section 1. Filing of petition with Supreme Court. - A party desiring to appeal

by certiorari from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law,
which must be distinctly set forth. The petitioner may seek the same provisional
remedies by verified motion filed in the same action or proceeding at any time during
its pendency. (Emphasis and underscoring supplied)

That the remedy excepted in the second paragraph of Section 14, RA 6770 could be a
petition for certiorari under Rule 65 of the 1964 Rules of Court or the 1997 Rules of
Procedure is a suggestion that defies traditional norms of procedure. It is basic
procedural law that a Rule 65 petition is based on errors of jurisdiction, and not errors
of judgment to which the classifications of (a) questions of fact, (b) questions of law, or
(c) questions of mixed fact and law, relate to. In fact, there is no procedural rule,
whether in the old or new Rules, which grounds a Rule 65 petition on pure questions of
law. Indeed, it is also a statutory construction principle that the lawmaking body cannot
be said to have intended the establishment of conflicting and hostile systems on the
same subject. Such a result would render legislation a useless and idle ceremony, and
subject the laws to uncertainty and unintelligibility.135 There should then be no
confusion that the second paragraph of Section 14, RA 6770 refers to a Rule 45 appeal
to this Court, and no other. In sum, the appropriate construction of this Ombudsman
Act provision is that all remedies against issuances of the Office of the Ombudsman are
prohibited, except the above-stated Rule 45 remedy to the Court on pure questions of
law.

C. Validity of the second paragraph of

Section 14, RA 6770.

Of course, the second paragraph of Section 14, RA 6770's extremely limited restriction
on remedies is inappropriate since a Rule 45 appeal -which is within the sphere of the
rules of procedure promulgated by this Court - can only be taken against final decisions
or orders of lower courts,136 and not against "findings" of quasi-judicial agencies. As will
be later elaborated upon, Congress cannot interfere with matters of procedure; hence,
it cannot alter the scope of a Rule 45 appeal so as to apply to interlocutory "findings"
issued by the Ombudsman. More significantly, by confining the remedy to a Rule 45
appeal, the provision takes away the remedy of certiorari, grounded on errors of
jurisdiction, in denigration of the judicial power constitutionally vested in courts. In this
light, the second paragraph of Section 14, RA 6770 also increased this Court's appellate
jurisdiction, without a showing, however, that it gave its consent to the same. The

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provision is, in fact, very similar to the fourth paragraph of Section 27, RA 6770 (as
above-cited), which was invalidated in the case of Fabian v. Desiertoni137 (Fabian).138

In Fabian, the Court struck down the fourth paragraph of Section 27, RA 6770 as
unconstitutional since it had the effect of increasing the appellate jurisdiction of the
Court without its advice and concurrence in violation of Section 30, Article VI of the
1987 Constitution.139 Moreover, this provision was found to be inconsistent with Section
1, Rule 45 of the present 1997 Rules of Procedure which, as above-intimated, applies
only to a review of "judgments or final orders of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court, or other courts
authorized by law;" and not of quasi-judicial agencies, such as the Office of the
Ombudsman, the remedy now being a Rule 43 appeal to the Court of Appeals.
In Ruivivar v. Office of the Ombudsman,140 the Court's ratiocinations and ruling
in Fabian were recounted:

The case of Fabian v. Desierto arose from the doubt created in the application of
Section 27 of R.A. No. 6770 (The Ombudsman's Act) and Section 7, Rule III of A.O. No.
7 (Rules of Procedure of the Office of the Ombudsman) on the availability of appeal
before the Supreme Court to assail a decision or order of the Ombudsman in
administrative cases. In Fabian, we invalidated Section 27 of R.A. No. 6770 (and
Section 7, Rule III of A.O. No. 7 and the other rules implementing the Act)
insofar as it provided for appeal by certiorari under Rule 45 from the decisions
or orders of the Ombudsman in administrative cases. We held that Section 27
of R.A. No. 6770 had the effect, not only of increasing the appellate
jurisdiction of this Court without its advice and concurrence in violation of
Section 30, Article VI of the Constitution; it was also inconsistent with Section
1, Rule 45 of the Rules of Court which provides that a petition for review
on certiorari shall apply only to a review of "judgments or final orders of the
Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional
Trial Court, or other courts authorized by law." We pointedly said: chanRoblesvirtualLawlibrary

As a consequence of our ratiocination that Section 27 of Republic Act No. 6770 should
be struck down as unconstitutional, and in line with the regulatory philosophy adopted
in appeals from quasi-judicial agencies in the 1997 Revised Rules of Civil Procedure,
appeals from decisions of the Office of the Ombudsman in administrative disciplinary
cases should be taken to the CA under the provisions of Rule 43.141 (Emphasis supplied)

Since the second paragraph of Section 14, RA 6770 limits the remedy against "decision
or findings" of the Ombudsman to a Rule 45 appeal and thus - similar to the fourth
paragraph of Section 27, RA 6770142 - attempts to effectively increase the Supreme
Court's appellate jurisdiction without its advice and concurrence,143 it is therefore
concluded that the former provision is also unconstitutional and perforce, invalid.
Contrary to the Ombudsman's posturing,144Fabian should squarely apply since the
above-stated Ombudsman Act provisions are in part materia in that they "cover the
same specific or particular subject matter,"145 that is, the manner of judicial review over
issuances of the Ombudsman.

Note that since the second paragraph of Section 14, RA 6770 is clearly determinative of
the existence of the CA's subject matter jurisdiction over the main CA-G.R. SP No.
139453 petition, including all subsequent proceedings relative thereto, as the
Ombudsman herself has developed, the Court deems it proper to resolve this issue ex

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mero motu  (on its own motion146). This procedure, as was similarly adopted
in Fabian, finds its bearings in settled case law:

The conventional rule, however, is that a challenge on constitutional grounds must be

raised by a party to the case, neither of whom did so in this case, but that is not an
inflexible rule, as we shall explain.

Since the constitution is intended for the observance of the judiciary and other
departments of the government and the judges are sworn to support its provisions, the
courts are not at liberty to overlook or disregard its commands or countenance evasions
thereof. When it is clear , that a statute transgresses the authority vested in a
legislative body, it is the duty of the courts to declare that the constitution, and not the
statute, governs in a case before them for judgment.

Thus, while courts will not ordinarily pass upon constitutional questions which are not
raised in the pleadings, the rule has been recognized to admit of certain exceptions. It
does not preclude a court from inquiring into its own jurisdiction or compel it to enter a
judgment that it lacks jurisdiction to enter. If a statute on which a court's jurisdiction in
a proceeding depends is unconstitutional, the court has no jurisdiction in the
proceeding, and since it may determine whether or not it has jurisdiction, it necessarily
follows that it may inquire into the constitutionality of the statute.

Constitutional questions, not raised in the regular and orderly procedure in the
trial are ordinarily rejected unless the jurisdiction of the court below or that of
the appellate court is involved in which case it may be raised at any time or on
the court's own motion. The Court ex mero motu may take cognizance of lack of
jurisdiction at any point in the case where that fact is developed. The court has a
clearly recognized right to determine its own jurisdiction in any
proceeding.147 (Emphasis supplied)

D. Consequence of invalidity.

In this case, the Rule 65 petition for certiorari in CA-G.R. SP No. 139453 was filed by
Binay, Jr. before the CA in order to nullify the preventive suspension order issued by
the Ombudsman, an interlocutory order,148 hence, unappealable.149

In several cases decided after Fabian, the Court has ruled that Rule 65 petitions
for certiorari against unappelable issuances150 of the Ombudsman should be filed before
the CA, and not directly before this Court:

In Office of the Ombudsman v. Capulong151 (March 12, 2014), wherein a preventive

suspension order issued by the Office of the Ombudsman was - similar to this case -
assailed through a Rule 65 petition for certiorari filed by the public officer before the
CA, the Court held that "[t]here being a finding of grave abuse of discretion on the part
of the Ombudsman, it was certainly imperative for the CA to grant incidental reliefs, as
sanctioned by Section 1 of Rule 65."152

In Dagan v. Office of the Ombudsman 153 (November 19, 2013), involving a Rule 65

petition for certiorari assailing a final and unappealable order of the Office of the
Ombudsman in an administrative case, the Court remarked that "petitioner employed

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the correct mode of review in this case, i.e., a special civil action for certiorari before
the Court of Appeals."154 In this relation, it stated that while "a special civil action
for Certiorari is within the concurrent original jurisdiction of the Supreme Court and the
Court of Appeals, such petition should be initially filed with the Court of Appeals in
observance of the doctrine of hierarchy of courts." Further, the Court upheld Barata v.
Abalos, Jr.155 (June 6, 2001), wherein it was ruled that the remedy against final and
unappealable orders of the Office of the Ombudsman in an administrative case was a
Rule 65 petition to the CA. The same verdict was reached in Ruivivar156 (September 16,
2008).

Thus, with the unconstitutionality of the second paragraph of Section 14, RA 6770, the
Court, consistent with existing jurisprudence, concludes that the CA has subject matter
jurisdiction over the main CA-G.R. SP No. 139453 petition. That being said, the Court
now examines the objections of the Ombudsman, this time against the CA's authority to
issue the assailed TRO and WPI against the implementation of the preventive
suspension order, incidental to that main case.

III.

From the inception of these proceedings, the Ombudsman has been adamant that the
CA has no jurisdiction to issue any provisional injunctive writ against her office to enjoin
its preventive suspension orders. As basis, she invokes the first paragraph of
Section 14, RA 6770 in conjunction with her office's independence under the 1987
Constitution. She advances the idea that "[i]n order to further ensure [her office's]
independence, [RA 6770] likewise insulated it from judicial intervention,"157 particularly,
"from injunctive reliefs traditionally obtainable from the courts,"158 claiming that said
writs may work "just as effectively as direct harassment or political pressure would."159

A. The concept of Ombudsman independence.

Section 5, Article XI of the 1987 Constitution guarantees the independence of the Office
of the Ombudsman:

Section 5. There is hereby created the independent Office of the Ombudsman,

composed of the Ombudsman to be known as Tanodbayan, one overall Deputy and at
least one Deputy each for Luzon, Visayas[,] and Mindanao. A separate Deputy for the
military establishment may likewise be appointed. (Emphasis supplied)

In Gonzales III v. Office of the President 160 (Gonzales III), the Court traced the
historical underpinnings of the Office of the Ombudsman:

Prior to the 1973 Constitution, past presidents established several Ombudsman-like

agencies to serve as the people's medium for airing grievances and for direct redress
against abuses and misconduct in the government. Ultimately, however, these agencies
failed to fully realize their objective for lack of the political independence necessary for
the effective performance of their function as government critic.

It was under the 1973 Constitution that the Office of the Ombudsman became a
constitutionally-mandated office to give it political independence and adequate powers
to enforce its mandate. Pursuant to the ( 1973 Constitution, President Ferdinand

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Marcos enacted Presidential Decree (PD) No. 1487, as amended by PD No. 1607 and PD
No. 1630, creating the Office of the Ombudsman to be known as Tanodbayan. It was
tasked principally to investigate, on complaint or motu proprio, any administrative act
of any administrative agency, including any government-owned or controlled
corporation. When the Office of the Tanodbayan was reorganized in 1979, the powers
previously vested in the Special Prosecutor were transferred to the Tanodbayan himself.
He was given the exclusive authority to conduct preliminary investigation of all cases
cognizable by the Sandiganbayan, file the corresponding information, and control the
prosecution of these cases.

With the advent of the 1987 Constitution, a new Office of the Ombudsman was created
by constitutional fiat. Unlike in the 1973 Constitution, its independence was
expressly and constitutionally guaranteed. Its objectives are to enforce the state
policy in Section 27, Article II and the standard of accountability in public service under
Section 1, Article XI of the 1987 Constitution. These provisions read: chanRoblesvirtualLawlibrary

Section 27. The State shall maintain honesty and integrity in the public service and take
positive and effective measures against graft and corruption.

Section 1. Public office is a public trust. Public officers and employees must, at all
times, be accountable to the people, serve them with utmost responsibility, integrity,
loyalty, and efficiency; act with patriotism and justice, and lead modest
lives.161 (Emphasis supplied)

More significantly, Gonzales III explained the broad scope of the office's mandate, and
in correlation, the impetus behind its independence:

Under Section 12, Article XI of the 1987 Constitution, the Office of the Ombudsman is
envisioned to be the "protector of the people" against the inept, abusive, and corrupt in
the Government, to function essentially as a complaints and action bureau. This
constitutional vision of a Philippine Ombudsman practically intends to make the
Ombudsman an authority to directly check and guard against the ills, abuses and
excesses , of the bureaucracy. Pursuant to Section 13 (8), Article XI of the 1987
Constitution, Congress enacted RA No. 6770 to enable it to further realize the vision of
the Constitution. Section 21 of RA No. 6770 provides: chanRoblesvirtualLawlibrary

Section 21. Official Subject to Disciplinary Authority; Exceptions. - The Office of the
Ombudsman shall have disciplinary authority over all elective and appointive officials of
the Government and its subdivisions, instrumentalities, and agencies, including
Members of the Cabinet, local government, government-owned or controlled
corporations and their subsidiaries, except over officials who may be removed only by
impeachment or over Members of Congress, and the Judiciary. ChanRoblesVirtualawlibrary

As the Ombudsman is expected to be an "activist watchman," the < Court has upheld
its actions, although not squarely falling under the broad powers granted [to] it by the
Constitution and by RA No. 6770, if these actions are reasonably in line with its official
function and consistent with the law and the Constitution.

The Ombudsman's broad investigative and disciplinary powers include all acts of
malfeasance, misfeasance, and nonfeasance of all public officials, including Members of
the Cabinet and key Executive officers, during their tenure. To support these broad
powers, the Constitution saw it fit to insulate the Office of the Ombudsman
from the pressures and influence of officialdom and partisan politics and from

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fear of external reprisal by making it an "independent" office, x x x.

xxxx

Given the scope of its disciplinary authority, the Office of the Ombudsman is a very
powerful government constitutional agency that is considered "a notch above other
grievance-handling investigative bodies." It has powers, both constitutional and
statutory, that are commensurate , with its daunting task of enforcing accountability of
public officers.162 (Emphasis and underscoring supplied)

Gonzales III is the first case which grappled with the meaning of the Ombudsman's
independence vis-a-vis the independence of the other constitutional bodies. Pertinently,
the Court observed:

(1) "[T]he independence enjoyed by the Office of the Ombudsman and by the

Constitutional Commissions shares certain characteristics - they do not owe their
existence to any act of Congress, but are created by the Constitution itself;
additionally, they all enjoy fiscal autonomy. In general terms, the framers of the
Constitution intended that these 'independent' bodies be insulated from
political pressure to the extent that the absence of 'independence' would result in the
impairment of their core functions"163;
cralawlawlibrary

(2) "[T]he Judiciary, the Constitutional Commissions, and the Ombudsman must have
the independence and flexibility needed in the discharge of their constitutional duties.
The imposition of restrictions and constraints on the manner the independent
constitutional offices allocate and utilize the funds appropriated for their
operations is anathema to fiscal autonomy and violative not only [of] the express
mandate of the Constitution, but especially as regards the Supreme Court, of the
independence and separation of powers upon which the entire fabric of our
constitutional system is based";164 and

(3) "[T]he constitutional deliberations explain the Constitutional Commissions' need for

independence. In the deliberations of the 1973 Constitution, the delegates amended the
1935 Constitution by providing for a constitutionally-created Civil Service Commission,
instead of one created by law, on the premise that the effectivity of this body is
dependent on its freedom from the tentacles of politics. In a similar manner, the
deliberations of the 1987 Constitution on the Commission on Audit highlighted the
developments in the past Constitutions geared towards insulating the Commission
on Audit from political pressure."165

At bottom, the decisive ruling in Gonzales III, however, was that the independence of
the Office of the Ombudsman, as well as that of the foregoing independent
bodies, meant freedom from control or supervision of the Executive
Department:

[T]he independent constitutional commissions have been consistently intended by the

framers to be independent from executive control or supervision or any form of
political influence. At least insofar as these bodies are concerned, jurisprudence is
not scarce on how the "independence" granted to these bodies prevents presidential
interference.

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In Brillantes, Jr. v. Yorac (G.R. No. 93867, December 18, 1990, 192 SCRA 358), we
emphasized that the Constitutional Commissions, which have been characterized under
the Constitution as "independent," are not under the control of the President, even
if they discharge functions that are executive in nature. The Court declared as
unconstitutional the President's act of temporarily appointing the respondent in that
case as Acting Chairman of the [Commission on Elections] "however well-meaning" it
might have been.

In Bautista v. Senator Salonga (254 Phil. 156, 179 [1989]), the Court categorically
stated that the tenure of the commissioners of the independent Commission on Human
Rights could not be placed under the discretionary power of the President.

xxxx

The kind of independence enjoyed by the Office of the Ombudsman certainly cannot be
inferior - but is similar in degree and kind - to the independence similarly guaranteed
by the Constitution to the Constitutional Commissions since all these offices fill the
political interstices of a republican democracy that are crucial to its existence and
proper functioning.166 (Emphases and underscoring supplied)

Thus, in Gonzales III, the Court declared Section 8 (2), RA 6770, which provides that
"[a] Deputy or the Special Prosecutor, may be removed from office by the President for
any of the grounds provided for the removal of the Ombudsman, and after due
process," partially unconstitutional insofar as it subjected the Deputy Ombudsman to
the disciplinary authority of the President for violating the principle of independence.
Meanwhile, the validity of Section 8 (2), RA 6770 was maintained insofar as the Office
of the Special Prosecutor was concerned since said office was not considered to be
constitutionally within the Office of the Ombudsman and is, hence, not entitled to the
independence the latter enjoys under the Constitution.167

As may be deduced from the various discourses in Gonzales III, the concept of
Ombudsman's independence covers three (3) things:

First: creation by the Constitution, which means that the office cannot be abolished,
nor its constitutionally specified functions and privileges, be removed, altered, or
modified by law, unless the Constitution itself allows, or an amendment thereto is
made; cralawlawlibrary

Second: fiscal autonomy, which means that the office "may not be obstructed from
[its] freedom to use or dispose of [its] funds for purposes germane to [its]
functions;168hence, its budget cannot be strategically decreased by officials of the
political branches of government so as to impair said functions; and

Third: insulation from executive supervision and control, which means that those
within the ranks of the office can only be disciplined by an internal authority.

Evidently, all three aspects of independence intend to protect the Office of the
Ombudsman from political harassment and pressure, so as to free it from the
"insidious tentacles of politics."169

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That being the case, the concept of Ombudsman independence cannot be invoked as
basis to insulate the Ombudsman from judicial power constitutionally vested unto the
courts. Courts are apolitical bodies, which are ordained to act as impartial tribunals and
apply even justice to all. Hence, the Ombudsman's notion that it can be exempt from
an incident of judicial power - that is, a provisional writ of injunction against a
preventive suspension order - clearly strays from the concept's rationale of insulating
the office from political harassment or pressure.

B. The first paragraph of Section 14, RA

6770 in light of the powers of Congress and the
Court under the 1987 Constitution.

The Ombudsman's erroneous abstraction of her office's independence notwithstanding,

it remains that the first paragraph of Section 14, RA 6770 textually prohibits courts
from extending provisional injunctive relief to delay any investigation conducted by her
office. Despite the usage of the general phrase "[n]o writ of injunction shall be issued
by any court," the Ombudsman herself concedes that the prohibition does not cover the
Supreme Court.170 As support, she cites the following Senate deliberations:

Senator [Ernesto M.] Maceda. Mr. President, I do not know if an amendment is

necessary. I would just like to inquire for the record whether below the
Supreme Court, it is understood that there is no injunction policy against the
Ombudsman by lower courts. Or, is it necessary to have a special paragraph
for that?

Senator Angara. Well, there is no provision here, Mr. President, that will prevent an
injunction against the Ombudsman being issued.

Senator Maceda. In which case, I think that the intention, this being one of
the highest constitutional bodies, is to subject this only to   certiorari  to the
Supreme Court. I think an injunction from the Supreme Court is, of course, in
order but no lower courts should be allowed to interfere.  We had a very bad
experience with even, let us say, the Forestry Code where no injunction is supposed to
be issued against the Department of Natural Resources. Injunctions are issued right
and left by RTC judges all over the country.

The President. Why do we not make an express provision to that effect?

Senator Angara. We would welcome that, Mr. President.

The President. No [writs of injunction] from the trial courts other than the
Supreme Court.

Senator Maceda. I so move, Mr. President, for that amendment.

The President. Is there any objection? [Silence] Hearing none, the same is

approved.171

Further, she acknowledges that by virtue of Sections 1 and 5 (1), Article VIII of the

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1987 Constitution, acts of the Ombudsman, including interlocutory orders, are subject
to the Supreme Court's power of judicial review As a corollary, the Supreme Court may
issue ancillary mjunctive writs or provisional remedies in the exercise of its power of
judicial review over matters pertaining to ongoing investigations by the Office of the
Ombudsman. Respecting the CA, however, the Ombudsman begs to differ.172

With these submissions, it is therefore apt to examine the validity of the first paragraph
of Section 14, RA 6770 insofar as it prohibits all courts, except this Court, from issuing
provisional writs of injunction to enjoin an Ombudsman investigation. That the
constitutionality of this provision is the lis mota of this case has not been seriously
disputed. In fact, the issue anent its constitutionality was properly raised and presented
during the course of these proceedings.173 More importantly, its resolution is clearly
necessary to the complete disposition of this case.174

In the enduring words of Justice Laurel in Angara v. The Electoral

Commission (Angara),175 the "Constitution has blocked out with deft strokes and in bold
lines, allotment of power to the executive, the legislative[,] and the judicial
departments of the government."176 The constitutional demarcation of the three
fundamental powers of government is more commonly known as the principle of
separation of powers. In the landmark case of Belgica v. Ochoa, Jr. (Belgica),177 the
Court held that "there is a violation of the separation of powers principle when one
branch of government unduly encroaches on the domain of another."178 In particular,
"there is a violation of the principle when there is impermissible (a) interference with
and/or (b) assumption of another department's functions."179

Under Section 1, Article VIII of the 1987 Constitution, judicial power is allocated to

the Supreme Court and all such lower courts:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.

This Court is the only court established by the Constitution, while all other lower
courts may be established by laws passed by Congress.  Thus, through the
passage of Batas Pambansa Bilang (BP) 129,180 known as "The Judiciary Reorganization
Act of 1980," the Court of Appeals,181 the Regional Trial Courts,182 and the Metropolitan
Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts183 were
established. Later, through the passage of RA 1125,184 and Presidential Decree No. (PD)
1486,185 the Court of Tax Appeals, and the Sandiganbayan were respectively
established.

In addition to the authority to establish lower courts, Section 2, Article VIII of the
1987 Constitution empowers Congress to define, prescribe, and apportion the
jurisdiction of all courts, except that it may not deprive the Supreme Court of
its jurisdiction over cases enumerated in Section 5186 of the same Article:

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Section 2. The Congress shall have the power to define, prescribe, ' and apportion the
jurisdiction of the various courts but may not deprive the Supreme Court of its
jurisdiction over cases enumerated in Section 5 hereof.

xxxx ChanRoblesVirtualawlibrary

Jurisdiction, as hereinabove used, more accurately pertains to jurisdiction over the

subject matter of an action. In The Diocese ofBacolod v. Commission on
Elections,187 subject matter jurisdiction was defined as "the authority 'to hear and
determine cases of the general class to which the proceedings in question
belong and is conferred by the sovereign authority which organizes the court
and defines its powers.'"

Among others, Congress defined, prescribed, and apportioned the subject matter
jurisdiction of this Court (subject to the aforementioned constitutional limitations), the
Court of Appeals, and the trial courts, through the passage of BP 129, as amended.

In this case, the basis for the CA's subject matter jurisdiction over Binay, Jr.'s main
petition for certiorari in CA-G.R. SP No. 139453 is Section 9(1), Chapter I of BP 129,
as amended:

Section 9. Jurisdiction. - The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari,

habeas corpus, and quo warranto, and auxiliary writs or processes,
whether or not in aid of its appellate jurisdiction[.]

Note that the CA's certiorari jurisdiction, as above-stated, is not only original but

also concurrent with the Regional Trial Courts (under Section 21 (1), Chapter II of BP
129), and the Supreme Court (under Section 5, Article VIII of the 1987 Philippine
Constitution). In view of the concurrence of these courts' jurisdiction over petitions
for certiorari, the doctrine of hierarchy of courts should be followed. In People v.
Cuaresma,188 the doctrine was explained as follows:

[T]his concurrence of jurisdiction is not x x x to be taken as according to parties

seeking any of the writs an absolute, unrestrained freedom of choice of the court to
which application therefor will be directed. There is after all a hierarchy of courts.
That hierarchy is determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard for that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals.189

When a court has subject matter jurisdiction over a particular case, as conferred

unto it by law, said court may then exercise its jurisdiction acquired over that case,
which is called judicial power.

Judicial power, as vested in the Supreme Court and all other courts established by

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law, has been defined as the "totality of powers a court exercises when it
assumes jurisdiction and hears and decides a case."190 Under Section 1, Article
VIII of the 1987 Constitution, it includes "the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government."

In Oposa v. Factoran, Jr.191 the Court explained the expanded scope of judicial power
under the 1987 Constitution:

The first part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred by law. The second part of the
authority represents a broadening of f judicial power to enable the courts of justice to
review what was before forbidden territory, to wit, the discretion of the political
departments of the government.

As worded, the new provision vests in the judiciary, and particularly the Supreme
Court, the power to rule upon even the wisdom of the decisions of the executive and
the legislature and to declare their acts invalid for lack or excess of jurisdiction because
they are tainted with grave abuse of discretion. The catch, of course, is the meaning of
"grave abuse of discretion," which is a very elastic phrase that can expand or contract
according to the disposition of the judiciary.192

Judicial power is never exercised in a vacuum. A court's exercise of the

jurisdiction it has acquired over a particular case conforms to the limits and
parameters of the rules of procedure duly promulgated by this Court. In other
words, procedure is the framework within which judicial power is exercised. In Manila
Railroad Co. v. Attorney-General,193 the Court elucidated that "[t]he power or authority
of the court over the subject matter existed and was fixed before procedure in a given
cause began. Procedure does not alter or change that power or authority; it
simply directs the manner in which it shall be fully and justly exercised.  To be
sure, in certain cases, if that power is not exercised in conformity with the provisions of
the procedural law, purely, the court attempting to exercise it loses the power to
exercise it legally. This does not mean that it loses jurisdiction of the subject matter."194

While the power to define, prescribe, and apportion the jurisdiction of the various courts
is, by constitutional design, vested unto Congress, the power to promulgate rules
concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts belongs exclusively to this Court. Section 5
(5), Article VIII of the 1987 Constitution reads:

Section 5. The Supreme Court shall have the following powers:

xxxx

(5) Promulgate rules concerning the protection and enforcement of

constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the Integrated Bar, and legal assistance to the
underprivileged. Such rules shall provide a simplified and inexpensive procedure for the

119 | P a g e
speedy disposition of cases, shall be uniform for all courts of the same grade, and shall
not diminish, increase, or modify substantive rights. Rules of procedure of special
courts and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court. (Emphases and underscoring supplied)

In Echegaray v. Secretary of Justice195 (Echegaray), the Court traced the evolution of its

rule-making authority, which, under the 1935196 and 1973 Constitutions,197 had been
priorly subjected to a power-sharing scheme with Congress.198 As it now stands, the
1987 Constitution textually altered the old provisions by deleting the concurrent
power of Congress to amend the rules, thus solidifying in one body the Court's
rule-making powers, in line with the Framers' vision of institutionalizing a
"[s]tronger and more independent judiciary."199

The records of the deliberations of the Constitutional Commission would show200 that

the Framers debated on whether or not the Court's rule-making powers should be
shared with Congress. There was an initial suggestion to insert the sentence "The
National Assembly may repeal, alter, or supplement the said rules with the advice and
concurrence of the Supreme Court", right after the phrase "Promulgate rules concerning
the protection and enforcement of constitutional rights, pleading, practice, and
procedure in all courts, the admission to the practice of law, the integrated bar, and
legal assistance to the underprivileged^" in the enumeration of powers of the Supreme
Court. Later, Commissioner Felicitas S. Aquino proposed to delete the former sentence
and, instead, after the word "[underprivileged," place a comma (,) to be followed by
"the phrase with the concurrence of the National Assembly." Eventually, a compromise
formulation was reached wherein (a) the Committee members agreed to Commissioner
Aquino's proposal to delete the phrase "the National Assembly may repeal, alter, or
supplement the said rules with the advice and concurrence of the Supreme Court" and
(b) in turn, Commissioner Aquino agreed to withdraw his proposal to add "the phrase
with the concurrence of the National Assembly." The changes were approved,
thereby leading to the present lack of textual reference to any form of
Congressional participation in Section 5 (5), Article VIII, supra. The prevailing
consideration was that "both bodies, the Supreme Court and the Legislature,
have their inherent powers."201

Thus, as it now stands, Congress has no authority to repeal, alter, or supplement rules
concerning pleading, practice, and procedure. As pronounced in Echegaray:

The rule making power of this Court was expanded. This Court for the first time was
given the power to promulgate rules concerning the protection and enforcement of
constitutional rights. The Court was also r granted for the first time the power to
disapprove rules of procedure of special courts and quasi-judicial bodies. But most
importantly, the 1987 Constitution took away the power of Congress to repeal,
alter, or supplement rules concerning pleading, practice and procedure. In
fine, the power to promulgate rules of pleading, practice and procedure is no
longer shared by this Court with Congress, more so with the
Executive.202 (Emphasis and underscoring supplied)

Under its rule-making authority, the Court has periodically passed various rules of
procedure, among others, the current 1997 Rules of Civil Procedure. Identifying the
appropriate procedural remedies needed for the reasonable exercise of every

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court's judicial power, the provisional remedies of temporary restraining
orders and writs of preliminary injunction were thus provided.

A temporary restraining order and a writ of preliminary injunction both constitute

temporary measures availed of during the pendency of the action. They are, by nature,
ancillary because they are mere incidents in and are dependent upon the result of the
main action. It is well-settled that the sole object of a temporary restraining order
or a writ of preliminary injunction, whether prohibitory or mandatory, is
to preserve the status quo203 until the merits of the case can be heard. They are
usually granted when it is made to appear that there is a substantial controversy
between the parties and one of them is committing an act or threatening the immediate
commission of an act that will cause irreparable injury or destroy the status quo of the
controversy before a full hearing can be had on the merits of the case. In other words,
they are preservative remedies for the protection of substantive rights or interests, and,
hence, not a cause of action in itself, but merely adjunct to a main suit.204 In a sense,
they are regulatory processes meant to prevent a case from being mooted by the
interim acts of the parties.

Rule 58 of the 1997 Rules of Civil Procedure generally governs the provisional remedies
of a TRO and a WPI. A preliminary injunction is defined under Section 1,205 Rule 58,
while Section 3206 of the same Rule enumerates the grounds for its issuance.
Meanwhile, under Section 5207 thereof, a TRO may be issued as a precursor to the
issuance of a writ of preliminary injunction under certain procedural parameters.

The power of a court to issue these provisional injunctive reliefs coincides with
its inherent power to issue all auxiliary writs, processes, and other means
necessary to carry its acquired jurisdiction into effect under Section 6, Rule
135 of the Rules of Court which reads:

Section 6. Means to carry jurisdiction into effect. - When by law jurisdiction is conferred
on a court or judicial officer, all auxiliary writs, f processes and other means necessary
to carry it into effect may be employed by such court or officer; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically pointed out by law208 or
by these rules, any suitable process or mode of proceeding may be adopted which
appears comfortable to the spirit of the said law or rules. ChanRoblesVirtualawlibrary

In City of Manila v. Grecia-Cuerdo,209 which is a case involving "[t]he supervisory power

or jurisdiction of the [Court of Tax Appeals] to issue a writ of certiorari in aid of its
appellate jurisdiction"210 over "decisions, orders or resolutions of the RTCs in local tax
cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction,"211 the Court ruled that said power "should coexist with, and be a
complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the acts of the
latter:"212

A grant of appellate jurisdiction implies that there is included in it the power

necessary to exercise it effectively, to make all orders that ; will preserve the
subject of the action, and to give effect to the final determination of the appeal.
It carries with it the power to protect that jurisdiction and to make the decisions of the
court thereunder effective. The court, in aid of its appellate jurisdiction, has authority to

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control all auxiliary and incidental matters necessary to the efficient and proper
exercise of that jurisdiction. For this purpose, it may, when necessary, prohibit or
restrain the performance of any act which might interfere with the proper exercise of its
rightful jurisdiction in cases pending before it.213 (Emphasis supplied)

In this light, the Court expounded on the inherent powers of a court endowed with
subject matter jurisdiction:

[A] court which is endowed with a particular jurisdiction should have powers which are
necessary to enable it to act effectively within such jurisdiction. These should be
regarded as powers which are inherent in its jurisdiction and the court must
possess them in order to enforce its rules of practice and to suppress any
abuses of its process and to t defeat any attempted thwarting of such process.

x x x x  cralawlawlibrary

Indeed, courts possess certain inherent powers which may be said to be implied from

a general grant of jurisdiction, in addition to those expressly conferred on them. These
inherent powers are such powers as are necessary for the ordinary and
efficient exercise of jurisdiction; or are essential to the existence, dignity and
functions of the courts, as well as to the due administration of justice; or are
directly appropriate, convenient and suitable to the execution of their granted
powers; and include the power to maintain the court's jurisdiction and render
it effective in behalf of the litigants.214 (Emphases and underscoring supplied)

Broadly speaking, the inherent powers of the courts resonates the long-entrenched
constitutional principle, articulated way back in the 1936 case of Angara, that "where a
general power is conferred or duty enjoined, every particular power necessary for the
exercise of the one or the performance of the other is also conferred."215

In the United States, the "inherent powers doctrine refers to the principle, by which
the courts deal with diverse matters over which they are thought to have intrinsic
authority like procedural [rule-making] and general judicial housekeeping. To justify the
invocation or exercise of inherent powers, a court must show that the powers are
reasonably necessary to achieve the specific purpose for which the exercise is
sought. Inherent powers enable the judiciary to accomplish its constitutionally
mandated functions."216

In Smothers v. Lewis217 (Smothers), a case involving the constitutionality of a statute

which prohibited courts from enjoining the enforcement of a revocation order of an
alcohol beverage license pending appeal,218 the Supreme Court of Kentucky held:

[T]he Court is x x x vested with certain "inherent" powers to do that which is

reasonably necessary for the administration of justice within the scope of their
jurisdiction. x x x [W]e said while considering the rule making power and the judicial
power to be one and the same that ". . . the grant of judicial power [rule making
power] to the courts by the constitution carries with it, as a necessary
incident, the right to make that power effective in the administration of
justice." (Emphases supplied)

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Significantly, Smothers characterized a court's issuance of provisional injunctive relief
as an exercise of the court's inherent power, and to this end, stated that any attempt
on the part of Congress to interfere with the same was constitutionally impermissible:

It is a result of this foregoing line of thinking that we now adopt the language
framework of 28 Am.Jur.2d, Injunctions, Section 15, and once and for all make clear
that a court, once having obtained jurisdiction of a cause of action, has, as an incidental
to its constitutional grant of power, inherent power to do all things reasonably
necessary to the administration of justice in the case before it. In the exercise of this
power, a court, when necessary in order to protect or preserve the subject
matter of the litigation, to protect its jurisdiction and to make its judgment
effective, may grant or issue a temporary injunction in aid of or ancillary to
the principal action.

The control over this inherent judicial power, in this particular instance the
injunction, is exclusively within the constitutional realm of the courts. As such,
it is not within the purview of the legislature to grant or deny the power nor is
it within the purview of the legislature to shape or fashion circumstances
under which this inherently judicial power may be or may not be granted or
denied.

This Court has historically recognized constitutional limitations upon the power of the
legislature to interfere with or to inhibit the performance of constitutionally granted and
inherently provided judicial functions, x x x

xxxx

We reiterate our previously adopted language, ". . . a court, once having obtained
jurisdiction of a cause of action, has, as incidental to its general jurisdiction, inherent
power to do all things reasonably necessary f to the administration of justice in the case
before it. . ." This includes the inherent power to issue injunctions. (Emphases
supplied)

Smothers also pointed out that the legislature's authority to provide a right to appeal in
the statute does not necessarily mean that it could control the appellate judicial
proceeding:

However, the fact that the legislature statutorily provided for this appeal does not give
it the right to encroach upon the constitutionally granted powers of the judiciary. Once
the administrative action has ended and the right to appeal arises the
legislature is void of any right to control a subsequent appellate judicial
proceeding. The judicial rules have come into play and have preempted the
field.219 (Emphasis supplied)

With these considerations in mind, the Court rules that when Congress passed the first
paragraph of Section 14, RA 6770 and, in so doing, took away from the courts their
power to issue a TRO and/or WPI to enjoin an investigation conducted by the
Ombudsman, it encroached upon this Court's constitutional rule-making authority.
Clearly, these issuances, which are, by nature, provisional reliefs and auxiliary writs

123 | P a g e
created under the provisions of the Rules of Court, are matters of procedure which
belong exclusively within the province of this Court. Rule 58 of the Rules of Court did
not create, define, and regulate a right but merely prescribed the means of
implementing an existing right220 since it only provided for temporary reliefs to preserve
the applicant's right in esse which is threatened to be violated during the course of a
pending litigation. In the case of Fabian,211 it was stated that:

If the rule takes away a vested right, it is not procedural. If the rule creates a right
such as the right to appeal, it may be classified as a substantive matter; but if it
operates as a means of implementing an existing right then the rule deals merely with
procedure. ChanRoblesVirtualawlibrary

Notably, there have been similar attempts on the part of Congress, in the exercise of its
legislative power, to amend the Rules of Court, as in the cases of: (a) In Re: Exemption
of The National Power Corporation from Payment of Filing/ Docket Fees;222 (b) Re:
Petition for Recognition of the Exemption of the Government Service Insurance System
(GSIS) from Payment of Legal Fees;223 and (c)  Baguio Market Vendors Multi-Purpose
Cooperative (BAMARVEMPCO) v. Cabato-Cortes224 While these cases involved legislative
enactments exempting government owned and controlled corporations and
cooperatives from paying filing fees, thus, effectively modifying Rule 141 of the Rules of
Court (Rule on Legal Fees), it was, nonetheless, ruled that the prerogative to amend,
repeal or even establish new rules of procedure225 solely belongs to the Court,
to the exclusion of the legislative and executive branches of government. On
this score, the Court described its authority to promulgate rules on pleading, practice,
and procedure as exclusive and "[o]ne of the safeguards of [its] institutional
independence."226

That Congress has been vested with the authority to define, prescribe, and apportion
the jurisdiction of the various courts under Section 2, Article VIII supra, as well as to
create statutory courts under Section 1, Article VIII supra, does not result in an
abnegation of the Court's own power to promulgate rules of pleading, practice, and
procedure under Section 5 (5), Article VIII supra. Albeit operatively interrelated, these
powers are nonetheless institutionally separate and distinct, each to be preserved under
its own sphere of authority. When Congress creates a court and delimits its
jurisdiction, the procedure for which its jurisdiction is exercised is fixed by the
Court through the rules it promulgates. The first paragraph of Section 14, RA 6770
is not a jurisdiction-vesting provision, as the Ombudsman misconceives,227 because it
does not define, prescribe, and apportion the subject matter jurisdiction of courts to act
on certiorari cases; the certiorari jurisdiction of courts, particularly the CA, stands under
the relevant sections of BP 129 which were not shown to have been repealed. Instead,
through this provision, Congress interfered with a provisional remedy that was
created by this Court under its duly promulgated rules of procedure, which
utility is both integral and inherent to every court's exercise of judicial power.
Without the Court's consent to the proscription, as may be manifested by an
adoption of the same as part of the rules of procedure through an
administrative circular issued therefor, there thus, stands to be a violation of
the separation of powers principle.

In addition, it should be pointed out that the breach of Congress in prohibiting

provisional injunctions, such as in the first paragraph of Section 14, RA 6770, does not

124 | P a g e
only undermine the constitutional allocation of powers; it also practically dilutes a
court's ability to carry out its functions. This is so since a particular case can
easily be mooted by supervening events if no provisional injunctive relief is
extended while the court is hearing the same. Accordingly, the court's acquired
jurisdiction, through which it exercises its judicial power, is rendered nugatory. Indeed,
the force of judicial power, especially under the present Constitution, cannot be
enervated due to a court's inability to regulate what occurs during a proceeding's
course. As earlier intimated, when jurisdiction over the subject matter is accorded by
law and has been acquired by a court, its exercise thereof should be undipped. To give
true meaning to the judicial power contemplated by the Framers of our Constitution,
the Court's duly promulgated rules of procedure should therefore remain unabridged,
this, even by statute. Truth be told, the policy against provisional injunctive writs in
whatever variant should only subsist under rules of procedure duly promulgated by the
Court given its sole prerogative over the same.

The following exchange between Associate Justice Marvic Mario Victor F. Leonen
(Justice Leonen) and the Acting Solicitor General Florin T. Hilbay (Acting Solicitor
General Hilbay) mirrors the foregoing observations:

JUSTICE LEONEN:
Okay. Now, would you know what rule covers injunction in the Rules of Court?

ACTING SOLICITOR GENERAL HILBAY:

Rule 58, Your Honor.

JUSTICE LEONEN:
58, that is under the general rubric if Justice Bersamin will correct me if I will be
mistaken under the rubric of what is called provisional remedies, our resident expert
because Justice Peralta is not here so Justice Bersamin for a while. So provisional
remedy you have injunction, x x x.

xxxx

JUSTICE LEONEN:
Okay, Now, we go to the Constitution. Section 5, subparagraph 5 of Article VIII of the
Constitution, if you have a copy of the Constitution, can you please read that provision?
Section 5, Article VIII the Judiciary subparagraph 5, would you kindly read that
provision?

ACTING SOLICTOR GENERAL HILBAY.

"Promulgate rules concerning the protection and enforcement of constitutional rights,
pleading, practice and procedure in all courts..."

JUSTICE LEONEN:
Okay, we can stop with that, promulgate rules concerning pleading, practice and
procedure in all courts. This is the power, the competence, the jurisdiction of what
constitutional organ?

ACTING SOLICITOR GENERAL HILBAY:

The Supreme Court, Your Honor.

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JUSTICE LEONEN:
The Supreme Court. This is different from Article VIII Sections 1 and 2 which we've
already been discussed with you by my other colleagues, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
Okay, so in Section 2, [apportion] jurisdiction that is the power of Congress, is that not
correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
On the other hand, the power to promulgate rules is with the Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
A TRO and a writ of preliminary injunction, would it be a separate case or is it part of
litigation in an ordinary case?

ACTING SOLICITOR GENERAL HILBAY:

It is an ancillary remedy, Your Honor.

JUSTICE LEONEN:
In fact, it originated as an equitable remedy, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In order to preserve the power of a court so that at the end of litigation, it will
not be rendered moot and academic, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In that view, isn't Section 14, first paragraph, unconstitutional?

ACTING SOLICITOR GENERAL HILBAY:

No, Your Honor.

xxxx

JUSTICE LEONEN.

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Can Congress say that a Court cannot prescribe Motions to Dismiss under Rule 16?

ACTING SOLICITOR GENERAL HILBAY:

Your Honor, Congress cannot impair the power of the Court to create remedies, x x x.

JUSTICE LEONEN.
What about bill [of] particulars, can Congress say, no Court shall have the power to
issue the supplemental pleading called the bill of t particular [s]? It cannot, because
that's part of procedure...

ACTING SOLICITOR GENERAL HILBAY:

That is true.

JUSTICE LEONEN
...or for that matter, no Court shall act on a Motion to Quash, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct.

JUSTICE LEONEN:
So what's different with the writ of injunction?

ACTING SOLICITOR GENERAL HILBAY:

Writ of injunction, Your Honor, requires the existence of jurisdiction on the part of a
court that was created by Congress. In the absence of jurisdiction... (interrupted)

JUSTICE LEONEN:
No, writ of injunction does not attach to a court. In other words, when they create a
special agrarian court it has all procedures with it but it does not attach particularly to
that particular court, is that not correct?

ACTING SOLICTOR GENERAL HILBAY:

When Congress, Your Honor, creates a special court...

JUSTICE LEONEN:
Again, Counsel, what statute provides for a TRO, created the concept of a TRO? It was
a Rule. A rule of procedure and the Rules of Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Yes, Your Honor.

JUSTICE LEONEN:
And a TRO and a writ of preliminary injunction does not exist unless it is [an] ancillary
to a particular injunction in a court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

xxxx228 (Emphasis supplied)

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In Biraogo v. The Philippine Truth Commission of 2010, 229 the Court instructed that "[i]t
is through the Constitution that the fundamental powers of government are established,
limited and defined, and by which these powers are distributed among the several
departments. The Constitution is the basic and paramount law to which all other laws
must conform and to which all persons, including the highest officials of the land, must
defer." It would then follow that laws that do not conform to the Constitution shall be
stricken down for being unconstitutional.230

However, despite the ostensible breach of the separation of powers principle, the Court
is not oblivious to the policy considerations behind the first paragraph of Section 14, RA
6770, as well as other statutory provisions of similar import. Thus, pending deliberation
on whether or not to adopt the same, the Court, under its sole prerogative and
authority over all matters of procedure, deems it proper to declare as ineffective the
prohibition against courts other than the Supreme Court from issuing provisional
injunctive writs to enjoin investigations conducted by the Office of the Ombudsman,
until it is adopted as part of the rules of procedure through an administrative circular
duly issued therefor.

Hence, with Congress interfering with matters of procedure (through passing the first
paragraph of Section 14, RA 6770) without the Court's consent thereto, it remains that
the CA had the authority to issue the questioned injunctive writs enjoining the
implementation of the preventive suspension order against Binay, Jr. At the risk of
belaboring the point, these issuances were merely ancillary to the exercise of the
CA's certiorari jurisdiction conferred to it under Section 9 (1), Chapter I of BP 129, as
amended, and which it had already acquired over the main CA-G.R. SP No. 139453
case.

IV.

The foregoing notwithstanding, the issue of whether or not the CA gravely abused its
jurisdiction in issuing the TRO and WPI in CA-G.R. SP No. 139453 against the
preventive suspension order is a persisting objection to the validity of said injunctive
writs. For its proper analysis, the Court first provides the context of the assailed
injunctive writs.

A. Subject matter of the CA's iniunctive writs is the preventive suspension

order.

By nature, a preventive suspension order is not a penalty but only a preventive

measure. In Quimbo v. Acting Ombudsman Gervacio,231 the Court explained the
distinction, stating that its purpose is to prevent the official to be suspended
from using his position and the powers and prerogatives of his office to
influence potential witnesses or tamper with records which may be vital in the
prosecution of the case against him:

Jurisprudential law establishes a clear-cut distinction between suspension as preventive

measure and suspension as penalty. The distinction, by considering the purpose aspect
of the suspensions, is readily cognizable as they have different ends sought to be
achieved.

128 | P a g e
Preventive suspension is merely a preventive measure, a preliminary step in
an administrative investigation. The purpose of the suspension order is to
prevent the accused from using his position and the powers and prerogatives
of his office to influence potential witnesses or tamper with records which may
be vital in the prosecution of the case against him. If after such investigation, the
charge is established and the person investigated is found guilty of acts warranting his
suspension or removal, then he is suspended, removed or dismissed. This is the
penalty.

That preventive suspension is not a penalty is in fact explicitly provided by Section 24

of Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of
1987 (Executive Order No. 292) and other Pertinent Civil Service Laws.
Section. 24. Preventive suspension is not a punishment or penalty for misconduct in
office but is considered to be a preventive measure. (Emphasis supplied) ChanRoblesVirtualawlibrary

Not being a penalty, the period within which one is under preventive suspension is not
considered part of the actual penalty of suspension. So Section 25 of the same Rule XIV
provides: chanRoblesvirtualLawlibrary

Section 25. The period within which a public officer or employee charged is placed
under preventive suspension shall not be considered part of the actual penalty of
suspension imposed upon the employee found guilty.232 (Emphases supplied) ChanRoblesVirtualawlibrary

The requisites for issuing a preventive suspension order are explicitly stated in Section
24, RA 6770:

Section 24. Preventive Suspension. - The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such
officer or employee involves dishonesty, oppression or grave misconduct or
neglect in the performance of duty; (b) the charges would warrant removal
from the service; or (c) the respondent's continued stay in office may
prejudice the case filed against him.

The preventive suspension shall continue until the case is terminated by the Office of
the Ombudsman but not more than six (6) months, without pay, except when the delay
in the disposition of the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of such delay shall
not be counted in computing the period of suspension herein provided. (Emphasis and
underscoring supplied)

In other words, the law sets forth two (2) conditions that must be satisfied to justify the
issuance of an order of preventive suspension pending an investigation, namely:

(1) The evidence of guilt is strong; and

(2) Either of the following circumstances co-exist with the first requirement: chanRoblesvirtualLawlibrary

(a) The charge involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; cralawlawlibrary

129 | P a g e
(b) The charge would warrant removal from the service; or

(c) The respondent's continued stay in office may prejudice the case filed against
him.233ChanRoblesVirtualawlibrary

B. The basis of the CA's injunctive writs is the condonation doctrine.

Examining the CA's Resolutions in CA-G.R. SP No. 139453 would, however, show that
the Ombudsman's non-compliance with the requisites provided in Section 24, RA 6770
was not the basis for the issuance of the assailed injunctive writs.

The CA's March 16, 2015 Resolution which directed the issuance of the assailed TRO
was based on the case of Governor Garcia, Jr. v. CA234 (Governor Garcia, Jr.),
wherein the Court emphasized that "if it were established in the CA that the acts
subject of the administrative complaint were indeed committed during petitioner
[Garcia's] prior term, then, following settled jurisprudence, he can no longer be
administratively charged."235 Thus, the Court, contemplating the application of the
condonation doctrine, among others, cautioned, in the said case, that "it would have
been more prudent for [the appellate court] to have, at the very least, on account of
the extreme urgency of the matter and the seriousness of the issues raised in
the certiorari petition, issued a TRO x x x"236 during the pendency of the proceedings.

Similarly, the CA's April 6, 2015 Resolution which directed the issuance of the assailed
WPI was based on the condonation doctrine, citing the case of Aguinaldo v.
Santos237 The CA held that Binay, Jr. has an ostensible right to the final relief prayed
for, i.e., the nullification of the preventive suspension order, finding that the
Ombudsman can hardly impose preventive suspension against Binay, Jr. given that his
re-election in 2013 as City Mayor of Makati condoned any administrative liability arising
from anomalous activities relative to the Makati Parking Building project from 2007 to
2013.238 Moreover, the CA observed that although there were acts which were
apparently committed by Binay, Jr. beyond his first term , i.e., the alleged payments on
July 3, 4, and 24, 2013,239 corresponding to the services of Hillmarc's and MANA - still,
Binay, Jr. cannot be held administratively liable therefor based on the cases
of Salalima v. Guingona, Jr.,240 and Mayor Garcia v. Mojica,241 wherein the
condonation dobtrine was applied by the Court although the payments were made after
the official's election, reasoning that the payments were merely effected pursuant to
contracts executed before said re-election.242

The Ombudsman contends that it was inappropriate for the CA to have considered the
condonation doctrine since it was a matter of defense which should have been raised
and passed upon by her office during the administrative disciplinary
proceedings.243 However, the Court agrees with the CA that it was not precluded from
considering the same given that it was material to the propriety of according provisional
injunctive relief in conformity with the ruling in Governor Garcia, Jr., which was the
subsisting jurisprudence at that time. Thus, since condonation was duly raised by
Binay, Jr. in his petition in CA-G.R. SP No. 139453,244 the CA did not err in passing upon
the same. Note that although Binay, Jr. secondarily argued that the evidence of guilt
against him was not strong in his petition in CA-G.R. SP No. 139453,245 it appears that
the CA found that the application of the condonation doctrine was already sufficient to
enjoin the implementation of the preventive suspension order. Again, there is nothing

130 | P a g e
aberrant with this since, as remarked in the same case of Governor Garcia, Jr., if it was
established that the acts subject of the administrative complaint were indeed
committed during Binay, Jr.'s prior term, then, following the condonation doctrine, he
can no longer be administratively charged. In other words, with condonation having
been invoked by Binay, Jr. as an exculpatory affirmative defense at the onset, the CA
deemed it unnecessary to determine if the evidence of guilt against him was strong, at
least for the purpose of issuing the subject injunctive writs.

With the preliminary objection resolved and the basis of the assailed writs herein laid
down, the Court now proceeds to determine if the CA gravely abused its discretion in
applying the condonation doctrine.

C. The origin of the condonation doctrine.

Generally speaking, condonation has been defined as "[a] victim's express or implied
forgiveness of an offense, [especially] by treating the offender as if there had been
no offense."246

The condonation doctrine - which connotes this same sense of complete extinguishment
of liability as will be herein elaborated upon - is not based on statutory law. It is a
jurisprudential creation that originated from the 1959 case of Pascual v. Hon.
Provincial Board ofNueva Ecija,247 (Pascual),  which was therefore decided under the
1935 Constitution.

In Pascual, therein petitioner, Arturo Pascual, was elected Mayor of San Jose, Nueva
Ecija, sometime in November 1951, and was later re-elected to the same position in
1955. During his second term, or on October 6, 1956, the Acting Provincial Governor
filed administrative charges before the Provincial Board of Nueva Ecija against him
for grave abuse of authority and usurpation of judicial functions for acting on a criminal
complaint in Criminal Case No. 3556 on December 18 and 20, 1954. In defense, Arturo
Pascual argued that he cannot be made liable for the acts charged against him since
they were committed during his previous term of office, and therefore, invalid grounds
for disciplining him during his second term. The Provincial Board, as well as the Court of
First Instance of Nueva Ecija, later decided against Arturo Pascual, and when the case
reached this Court on appeal, it recognized that the controversy posed a novel issue -
that is, whether or not an elective official may be disciplined for a wrongful act
committed by him during his immediately preceding term of office.

As there was no legal precedent on the issue at that time, the Court,
in Pascual, resorted to American authorities and "found that cases on the matter
are conflicting due in part, probably, to differences in statutes and constitutional
provisions, and also, in part, to a divergence of views with respect to the question of
whether the subsequent election or appointment condones the prior
misconduct."248Without going into the variables of these conflicting views and
cases, it proceeded to state that:

The weight of authorities x x x seems to incline toward the rule denying the
right to remove one from office because of misconduct during a prior term, to
which we fully subscribe.249 (Emphasis and underscoring supplied)

131 | P a g e
The conclusion is at once problematic since this Court has now uncovered that there is
really no established weight of authority in the United States (US) favoring the doctrine
of condonation, which, in the words of Pascual, theorizes that an official's re-election
denies the right to remove him from office due to a misconduct during a prior term. In
fact, as pointed out during the oral arguments of this case, at least seventeen (17)
states in the US have abandoned the condonation doctrine.250 The Ombudsman aptly
cites several rulings of various US State courts, as well as literature published on the
matter, to demonstrate the fact that the doctrine is not uniformly applied across all
state jurisdictions. Indeed, the treatment is nuanced:

(1) For one, it has been widely recognized that the propriety of removing a public
officer from his current term or office for misconduct which he allegedly committed in a
prior term of office is governed by the language of the statute or constitutional
provision applicable to the facts of a particular case (see In Re Removal of Member of
Council Coppola).251 As an example, a Texas statute, on the one hand, expressly allows
removal only for an act committed during a present term: "no officer shall be
prosecuted or removed from office for any act he may have committed prior to his
election to office" (see State ex rel. Rowlings v. Loomis).252 On the other hand, the
Supreme Court of Oklahoma allows removal from office for "acts of commission,
omission, or neglect committed, done or omitted during a previous or preceding term of
office" (see State v. Bailey)253 Meanwhile, in some states where the removal statute is
silent or unclear, the case's resolution was contingent upon the interpretation of the
phrase "in office." On one end, the Supreme Court of Ohio strictly construed a removal
statute containing the phrase "misfeasance of malfeasance in office" and thereby
declared that, in the absence of clear legislative language making, the word "office"
must be limited to the single term during which the offense charged against the public
officer occurred (see State ex rel. Stokes v. Probate Court of Cuyahoga
County)254 Similarly, the Common Pleas Court of Allegheny County, Pennsylvania
decided that the phrase "in office" in its state constitution was a time limitation with
regard to the grounds of removal, so that an officer could not be removed for
misbehaviour which occurred; prior to the taking of the office (see Commonwealth v.
Rudman)255 The opposite was construed in the Supreme Court of Louisiana which took
the view that an officer's inability to hold an office resulted from the commission of
certain offenses, and at once rendered him unfit to continue in office, adding the fact
that the officer had been re-elected did not condone or purge the offense (see  State ex
rel. Billon v. Bourgeois).256 Also, in the Supreme Court of New York, Apellate Division,
Fourth Department, the court construed the words "in office" to refer not to a particular
term of office but to an entire tenure; it stated that the whole purpose of the legislature
in enacting the statute in question could easily be lost sight of, and the intent of the
law-making body be thwarted, if an unworthy official could not be removed during one
term for misconduct for a previous one (Newman v. Strobel).257

(2) For another, condonation depended on whether or not the public officer was a
successor in the same office for which he has been administratively charged. The "own-
successor theory," which is recognized in numerous States as an exception to
condonation doctrine, is premised on the idea that each term of a re-elected incumbent
is not taken as separate and distinct, but rather, regarded as one continuous term of
office. Thus, infractions committed in a previous term are grounds for removal because
a re-elected incumbent has no prior term to speak of258 (see Attorney-General v.

132 | P a g e
Tufts;259State v. Welsh;260Hawkins v. Common Council of Grand Rapids;261Territory v.
Sanches;262 and Tibbs v. City of Atlanta).263

(3) Furthermore, some State courts took into consideration the continuing nature of an
offense in cases where the condonation doctrine was invoked. In State ex rel. Douglas
v. Megaarden,264 the public officer charged with malversation of public funds was denied
the defense of condonation by the Supreme Court of Minnesota, observing that "the
large sums of money illegally collected during the previous years are still retained by
him." In State ex rel. Beck v. Harvey265 the Supreme Court of Kansas ruled that "there
is no necessity" of applying the condonation doctrine since "the misconduct continued in
the present term of office[;] [thus] there was a duty upon defendant to restore this
money on demand of the county commissioners." Moreover, in State ex rel.
Londerholm v. Schroeder,266 the Supreme Court of Kansas held that "insofar as
nondelivery and excessive prices are concerned, x x x there remains a continuing duty
on the part of the defendant to make restitution to the country x x x, this duty extends
into the present term, and neglect to discharge it constitutes misconduct."

Overall, the foregoing data clearly contravenes the preliminary conclusion

in Pascual that there is a "weight of authority" in the US on the condonation doctrine.
In fact, without any cogent exegesis to show that Pascual had accounted for the
numerous factors relevant to the debate on condonation, an outright adoption of the
doctrine in this jurisdiction would not have been proper.

At any rate, these US cases are only of persuasive value in the process of this Court's
decision-making. "[They] are not relied upon as precedents, but as guides of
interpretation."267 Therefore, the ultimate analysis is on whether or not the condonation
doctrine, as espoused in Pascual, and carried over in numerous cases after, can be held
up against prevailing legal norms. Note that the doctrine of stare decisis does not
preclude this Court from revisiting existing doctrine. As adjudged in the case of Belgica,
the stare decisis rule should not operate when there are powerful countervailing
considerations against its application.268 In other words, stare decisis becomes an
intractable rule only when circumstances exist to preclude reversal of standing
precedent.269 As the Ombudsman correctly points out, jurisprudence, after all, is not a
rigid, atemporal abstraction; it is an organic creature that develops and devolves along
with the society within which it thrives.270 In the words of a recent US Supreme Court
Decision, "[w]hat we can decide, we can undecide."271

In this case, the Court agrees with the Ombudsman that since the time Pascual  was
decided, the legal landscape has radically shifted. Again, Pascual was a 1959 case
decided under the 1935 Constitution, which dated provisions do not reflect the
experience of the Filipino People under the 1973 and 1987 Constitutions. Therefore, the
plain difference in setting, including, of course, the sheer impact of the condonation
doctrine on public accountability, calls for Pascual's judicious re-examination.

D. Testing the Condonation Doctrine.

Pascual's ratio decidendi may be dissected into three (3) parts:

First, the penalty of removal may not be extended beyond the term in which the public
officer was elected for each term is separate and distinct:

133 | P a g e
Offenses committed, or acts done, during previous term are generally held not
to furnish cause for removal and this is especially true where the constitution
provides that the penalty in proceedings for removal shall not extend beyond the
removal from office, and disqualification from holding office for the term for
which the officer was elected or appointed. (67 C.J.S. p. 248, citing Rice vs.
State, 161 S.W. 2d. 401; Montgomery vs. Nowell, 40 S.W. 2d. 418; People ex
rel. Bagshaw vs. Thompson, 130 P. 2d. 237; Board of Com'rs of Kingfisher County vs.
Shutter, 281 P. 222; State vs. Blake,  280 P. 388; In re Fudula, 147 A. 67;  State vs.
Ward, 43 S.W. 2d. 217).
The underlying theory is that each term is separate from other terms x x x.272

Second, an elective official's re-election serves as a condonation of previous

misconduct, thereby cutting the right to remove him therefor; and

[T]hat the  reelection to office operates as a condonation of the officer's previous

misconduct to the extent of cutting off the right to remove him therefor. (43 Am. Jur. p.
45, citing Atty. Gen. vs. Hasty, 184 Ala. 121, 63 So. 559, 50 L.R.A. (NS)
553.273 (emphasis supplied)

Third, courts may not deprive the electorate, who are assumed to have known the life
and character of candidates, of their right to elect officers:

As held in  Conant vs. Grogan (1887) 6 N.Y.S.R. 322, cited in 17 A.I.R. 281, 63 So. 559,
50 LRA (NS) 553 —
The Court should never remove a public officer for acts done prior to his present term
of office. To do otherwise would be to deprive the people of their right to elect their
officers. When the people have elected a man to office, it must be assumed that
they did this with knowledge of his life and character, and that they
disregarded or forgave his faults or misconduct, if he had been guilty of any. It
is not for the court, by reason of such faults or misconduct to practically overrule the
will of the people.274 (Emphases supplied)

The notable cases on condonation following Pascual are as follows:

(1) Lizares v. Hechanova275 (May 17, 1966) - wherein the Court first applied the
condonation doctrine, thereby quoting the above-stated passages from Pascual in
verbatim.

(2) Insco v. Sanchez, et al.276 (December 18, 1967) - wherein the Court clarified that
the condonation doctrine does not apply to a criminal case. It was explained that a
criminal case is different from an administrative case in that the former involves the
People of the Philippines as a community, and is a public wrong to the State at large;
whereas, in the latter, only the populace of the constituency he serves is affected. In
addition, the Court noted that it is only the President who may pardon a criminal
offense.

(3) Aguinaldo v. Santos277 (Aguinaldo; August 21, 1992) - a case decided under the

1987 Constitution wherein the condonation doctrine was applied in favor of then
Cagayan Governor Rodolfo E. Aguinaldo although his re-election merely supervened

134 | P a g e
the pendency of, the proceedings.

(4) Salalima v. Guinsona, Jr.278 (Salalima; May 22, 1996) -wherein the

Court reinforced the condonation doctrine by stating that the same is justified
by "sound public policy." According to the Court, condonation prevented the elective
official from being "hounded" by administrative cases filed by his "political enemies"
during a new term, for which he has to defend himself "to the detriment of public
service." Also, the Court mentioned that the administrative liability condoned by re-
election covered the execution of the contract and the incidents related therewith.279

(5) Mayor Garcia v. Mojica280 (Mayor Garcia; September 10, 1999) - wherein the

benefit of the doctrine was extended to then Cebu City Mayor Alvin B. Garcia who was
administratively charged for his involvement in an anomalous contract for the supply of
asphalt for Cebu City, executed only four (4) days before the upcoming elections. The
Court ruled that notwithstanding the timing of the contract's execution, the electorate is
presumed to have known the petitioner's background and character, including his past
misconduct; hence, his subsequent re-election was deemed a condonation of his prior
transgressions. More importantly, the Court held that the determinative time element in
applying the condonation doctrine should be the time when the contract was
perfected; this meant that as long as the contract was entered into during a
prior term, acts which were done to implement the same, even if done during
a succeeding term, do not negate the application of the condonation doctrine
in favor of the elective official.

(6) Salumbides, Jr. v. Office of the Ombudsman 281 (Salumbides, Jr.; April 23,

2010) - wherein the Court explained the doctrinal innovations in
the Salalima and Mayor Garcia rulings, to wit:

Salalima v. Guingona, Jr. and Mayor Garcia v. Hon. Mojica  reinforced the doctrine. The

condonation rule was applied even if the administrative complaint was not
filed before the reelection of the public official, and even if the alleged
misconduct occurred four days before the elections, respectively. Salalima did
not distinguish as to the date of filing of the administrative complaint, as long as the
alleged misconduct was committed during the prior term, the precise timing or period
of which Garcia did not further distinguish, as long as the wrongdoing that gave rise to
the public official's culpability was committed prior to the date of
reelection.282 (Emphasis supplied)ChanRoblesVirtualawlibrary

The Court, citing Civil Service Commission v. Sojor,283 also clarified that the

condonation doctrine would not apply to appointive officials since, as to them,
there is no sovereign will to disenfranchise.

(7) And finally, the above discussed case of Governor Garcia, Jr. -wherein the Court
remarked that it would have been prudent for the appellate court therein to have issued
a temporary restraining order against the implementation of a preventive suspension
order issued by the Ombudsman in view of the condonation doctrine.

A thorough review of the cases post-1987, among others, Aguinaldo, Salalima, Mayor

Garcia, and Governor Garcia, Jr. - all cited by the CA to justify its March 16, 2015 and
April 6, 2015 Resolutions directing the issuance of the assailed injunctive writs - would

135 | P a g e
show that the basis for condonation under the prevailing constitutional and statutory
framework was never accounted for. What remains apparent from the text of these
cases is that the basis for condonation, as jurisprudential doctrine, was - and still
remains - the above-cited postulates of Pascual, which was lifted from rulings of US
courts where condonation was amply supported by their own state laws. With respect to
its applicability to administrative cases, the core premise of condonation - that is, an
elective official's re-election cuts qff the right to remove him for an administrative
offense committed during a prior term - was adopted hook, line, and sinker in our
jurisprudence largely because the legality of that doctrine was never tested against
existing legal norms. As in the US, the propriety of condonation is - as it should be
-dependent on the legal foundation of the adjudicating jurisdiction. Hence, the Court
undertakes an examination of our current laws in order to determine if there is legal
basis for the continued application of the doctrine of condonation.

The foundation of our entire legal system is the Constitution. It is the supreme law of
the land;284 thus, the unbending rule is that every statute should be read in light of the
Constitution.285 Likewise, the Constitution is a framework of a workable government;
hence, its interpretation must take into account the complexities, realities, and politics
attendant to the operation of the political branches of government.286

As earlier intimated, Pascual  was a decision promulgated in 1959. Therefore, it was

decided within the context of the 1935 Constitution which was silent with respect to
public accountability, or of the nature of public office being a public trust. The provision
in the 1935 Constitution that comes closest in dealing with public office is Section 2,
Article II which states that "[t]he defense of the State is a prime duty of government,
and in the fulfillment of this duty all citizens may be required by law to render personal
military or civil service."287 Perhaps owing to the 1935 Constitution's silence on public
accountability, and considering the dearth of jurisprudential rulings on the matter, as
well as the variance in the policy considerations, there was no glaring objection
confronting the Pascual  Court in adopting the condonation doctrine that originated from
select US cases existing at that time.

With the advent of the 1973 Constitution, the approach in dealing with public officers
underwent a significant change. The new charter introduced an entire article on
accountability of public officers, found in Article XIII. Section 1 thereof positively
recognized, acknowledged, and declared that "[p]ublic office is a public trust."
Accordingly, "[p]ublic officers and employees shall serve with the highest
degree of responsibility, integrity, loyalty and efficiency, and shall remain
accountable to the people."

After the turbulent decades of Martial Law rule, the Filipino People have framed and
adopted the 1987 Constitution, which sets forth in the Declaration of Principles and
State Policies in Article II that "[t]he State shall maintain honesty and integrity in
the public service and take positive and effective measures against graft and
corruption."288 Learning how unbridled power could corrupt public servants under the
regime of a dictator, the Framers put primacy on the integrity of the public service by
declaring it as a constitutional principle and a State policy. More significantly, the 1987
Constitution strengthened and solidified what has been first proclaimed in the 1973
Constitution by commanding public officers to be accountable to the people at all
times:

136 | P a g e
Section 1. Public office is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency and act with patriotism and justice, and lead
modest lives. ChanRoblesVirtualawlibrary

In Belgica, it was explained that:

[t]he aphorism forged under Section 1, Article XI of the 1987 Constitution, which states
that "public office is a public trust," is an overarching reminder that every
instrumentality of government should exercise their official functions only in accordance
with the principles of the Constitution which embodies the parameters of the people's
trust. The notion of a public trust connotes accountability x x x.289 (Emphasis
supplied) ChanRoblesVirtualawlibrary

The same mandate is found in the Revised Administrative Code under the section of the
Civil Service Commission,290 and also, in the Code of Conduct and Ethical Standards for
Public Officials and Employees.291

For local elective officials like Binay, Jr., the grounds to discipline, suspend or
remove an elective local official from office are stated in Section 60 of Republic
Act No. 7160,292 otherwise known as the "Local Government Code of 1991" (LGC),
which was approved on October 10 1991, and took effect on January 1, 1992:

Section 60. Grounds for Disciplinary Action. - An elective local official may be

disciplined, suspended, or removed from office on any of the r following grounds: chanRoblesvirtualLawlibrary

(a) Disloyalty to the Republic of the Philippines; cralawlawlibrary

(b) Culpable violation of the Constitution; cralawlawlibrary

(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of

duty; cralawlawlibrary

(d) Commission of any offense involving moral turpitude or an offense punishable by at

least prision mayor; cralawlawlibrary

(e) Abuse of authority; cralawlawlibrary

(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case
of members of the sangguniang panlalawigan, sangguniang panlunsod, sanggunian
bayan, and sangguniang barangay; cralawlawlibrary

(g) Application for, or acquisition of, foreign citizenship or residence or the status of an
immigrant of another country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds enumerated above
by order of the proper court.

Related to this provision is Section 40 (b) of the LGC which states that those

removed from office as a result of an administrative case shall be disqualified
from running for any elective local position:

Section 40. Disqualifications. - The following persons are disqualified from running for
any elective local position:

xxxx

137 | P a g e
(b) Those removed from office as a result of an administrative case;

x x x x (Emphasis supplied) ChanRoblesVirtualawlibrary

In the same sense, Section 52 (a) of the RRACCS provides that the penalty of
dismissal from service carries the accessory penalty of perpetual
disqualification from holding public office:

Section 52. - Administrative Disabilities Inherent in Certain Penalties. -

a. The penalty of dismissal shall carry with it cancellation of eligibility,

forfeiture of retirement benefits, perpetual disqualification from holding
public office, and bar from taking the civil service examinations.

In contrast, Section 66 (b) of the LGC states that the penalty of suspension shall not
exceed the unexpired term of the elective local official nor constitute a bar to his
candidacy for as long as he meets the qualifications required for the office. Note,
however, that the provision only pertains to the duration of the penalty and its effect on
the official's candidacy. Nothing therein states that the administrative liability
therefor is extinguished by the fact of re-election:

Section 66. Form and Notice of Decision. - x x x.

xxxx

(b) The penalty of suspension shall not exceed the unexpired term of the respondent or
a period of six (6) months for every administrative offense, nor shall said penalty be a
bar to the candidacy of the respondent so suspended as long as he meets the
qualifications required for the office.

Reading the 1987 Constitution together with the above-cited legal provisions now leads
this Court to the conclusion that the doctrine of condonation is actually bereft of legal
bases.

To begin with, the concept of public office is a public trust and the corollary
requirement of accountability to the people at all times, as mandated under the
1987 Constitution, is plainly inconsistent with the idea that an elective local official's
administrative liability for a misconduct committed during a prior term can be wiped off
by the fact that he was elected to a second term of office, or even another elective
post. Election is not a mode of condoning an administrative offense, and there is
simply no constitutional or statutory basis in our jurisdiction to support the notion that
an official elected for a different term is fully absolved of any administrative liability
arising from an offense done during a prior term. In this jurisdiction, liability arising
from administrative offenses may be condoned bv the President in light of
Section 19, Article VII of the 1987 Constitution which was interpreted in Llamas v.
Orbos293 to apply to administrative offenses:

138 | P a g e
The Constitution does not distinguish between which cases executive clemency may be
exercised by the President, with the sole exclusion of impeachment cases. By the same
token, if executive clemency may be exercised only in criminal cases, it would indeed
be unnecessary to provide for the exclusion of impeachment cases from the coverage of
Article VII, Section 19 of the Constitution. Following petitioner's proposed
interpretation, cases of impeachment are automatically excluded inasmuch as the same
do not necessarily involve criminal offenses.

In the same vein, We do not clearly see any valid and convincing , reason why the
President cannot grant executive clemency in administrative cases. It is Our considered
view that if the President can grant reprieves, commutations and pardons, and remit
fines and forfeitures in criminal cases, with much more reason can she grant executive
clemency in administrative cases, which are clearly less serious than criminal offenses.

Also, it cannot be inferred from Section 60 of the LGC that the grounds for discipline
enumerated therein cannot anymore be invoked against an elective local official to hold
him administratively liable once he is re-elected to office. In fact, Section 40 (b) of the
LGC precludes condonation since in the first place, an elective local official who is meted
with the penalty of removal could not be re-elected to an elective local position due to a
direct disqualification from running for such post. In similar regard, Section 52 (a) of
the RRACCS imposes a penalty of perpetual disqualification from holding public office as
an accessory to the penalty of dismissal from service.

To compare, some of the cases adopted in Pascual were decided by US State

jurisdictions wherein the doctrine of condonation of administrative liability was
supported by either a constitutional or statutory provision stating, in effect, that an
officer cannot be removed by a misconduct committed during a previous term,294 or
that the disqualification to hold the office does not extend beyond the term in
which the official's delinquency occurred. 295 In one case,296 the absence of a
provision against the re-election of an officer removed - unlike Section 40 (b) of the
LGC-was the justification behind condonation. In another case,297 it was deemed that
condonation through re-election was a policy under their constitution - which
adoption in this jurisdiction runs counter to our present Constitution's requirements on
public accountability. There was even one case where the doctrine of condonation was
not adjudicated upon but only invoked by a party as a ground;298 while in another case,
which was not reported in full in the official series, the crux of the disposition was that
the evidence of a prior irregularity in no way pertained to the charge at issue and
therefore, was deemed to be incompetent.299 Hence, owing to either their variance or
inapplicability, none of these cases can be used as basis for the continued adoption of
the condonation doctrine under our existing laws.

At best, Section 66 (b) of the LGC prohibits the enforcement of the penalty of

suspension beyond the unexpired portion of the elective local official's prior term, and
likewise allows said official to still run for re-election This treatment is similar to People
ex rel Bagshaw v. Thompson300 and Montgomery v. Novell301 both cited
in Pascual, wherein it was ruled that an officer cannot be suspended for a misconduct
committed during a prior term. However, as previously stated, nothing in Section 66 (b)
states that the elective local official's administrative liability is extinguished by the fact
of re-election. Thus, at all events, no legal provision actually supports the theory that
the liability is condoned.

139 | P a g e
Relatedly it should be clarified that there is no truth in Pascual's postulation that the
courts would be depriving the electorate of their right to elect their officers if
condonation were not to be sanctioned. In political law, election pertains to the process
by which a particular constituency chooses an individual to hold a public office. In this
jurisdiction, there is, again, no legal basis to conclude that election automatically
implies condonation. Neither is there any legal basis to say that every democratic and
republican state has an inherent regime of condonation. If condonation of an elective
official's administrative liability would perhaps, be allowed in this jurisdiction, then the
same should have been provided by law under our governing legal mechanisms. May it
be at the time of Pascual or at present, by no means has it been shown that such a law,
whether in a constitutional or statutory provision, exists. Therefore, inferring from this
manifest absence, it cannot be said that the electorate's will has been abdicated.

Equally infirm is Pascual's proposition that the electorate, when re-electing a local

official, are assumed to have done so with knowledge of his life and character, and that
they disregarded or forgave his faults or misconduct, if he had been guilty of any.
Suffice it to state that no such presumption exists in any statute or procedural
rule.302 Besides, it is contrary to human experience that the electorate would have full
knowledge of a public official's misdeeds. The Ombudsman correctly points out the
reality that most corrupt acts by public officers are shrouded in secrecy, and concealed
from the public. Misconduct committed by an elective official is easily covered
up, and is almost always unknown to the electorate when they cast their
votes.303 At a conceptual level, condonation presupposes that the condoner has actual
knowledge of what is to be condoned. Thus, there could be no condonation of an
act that is unknown. As observed in Walsh v. City Council of Trenton304 decided by
the New Jersey Supreme Court:

Many of the cases holding that re-election of a public official prevents his removal for
acts done in a preceding term of office are reasoned out on the theory of condonation.
We cannot subscribe to that theory because condonation, implying as it does
forgiveness, connotes knowledge and in the absence of knowledge there can be no
condonation. One cannot forgive something of which one has no knowledge.

That being said, this Court simply finds no legal authority to sustain the condonation
doctrine in this jurisdiction. As can be seen from this discourse, it was a doctrine
adopted from one class of US rulings way back in 1959 and thus, out of touch from -
and now rendered obsolete by - the current legal regime. In consequence, it is high
time for this Court to abandon the condonation doctrine that originated from Pascual,
and affirmed in the cases following the same, such as Aguinaldo, Salalima, Mayor
Garcia, and Governor Garcia, Jr. which were all relied upon by the CA.

It should, however, be clarified that this Court's abandonment of the condonation

doctrine should be prospective in application for the reason that judicial decisions
applying or interpreting the laws or the Constitution, until reversed, shall form part of
the legal system of the Philippines.305 Unto this Court devolves the sole authority to
interpret what the Constitution means, and all persons are bound to follow its
interpretation. As explained in De Castro v. Judicial Bar Council.306

140 | P a g e
Judicial decisions assume the same authority as a statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are applicable, the criteria that
must control the actuations, not only of those called upon to abide by them, but also of
those duty-bound to enforce obedience to them.307

Hence, while the future may ultimately uncover a doctrine's error, it should be, as a
general rule, recognized as "good law" prior to its abandonment. Consequently, the
people's reliance thereupon should be respected. The landmark case on this matter
is People v. Jabinal,308 wherein it was ruled:

[W]hen a doctrine of this Court is overruled and a different view is adopted, the new
doctrine should be applied prospectively, and should not apply to parties who had relied
on the old doctrine and acted on the faith thereof.

Later, in Spouses Benzonan v. CA,309 it was further elaborated:

[Pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the
laws or the Constitution shall form a part of the legal system of the Philippines." But
while our decisions form part of the law of the land, they are also subject to Article 4 of
the Civil Code which provides that "laws shall have no retroactive effect unless the
contrary is provided." This is expressed in the familiar legal maxim  lex prospicit, non
respicit, the law looks forward not backward. The rationale against retroactivity is easy
to perceive. The retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is
unconstitutional.310
ChanRoblesVirtualawlibrary

Indeed, the lessons of history teach us that institutions can greatly benefit from
hindsight and rectify its ensuing course. Thus, while it is truly perplexing to think that a
doctrine which is barren of legal anchorage was able to endure in our jurisprudence for
a considerable length of time, this Court, under a new membership, takes up the
cudgels and now abandons the condonation doctrine.

E. Consequence of ruling.

As for this section of the Decision, the issue to be resolved is whether or not
the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the assailed injunctive writs.

It is well-settled that an act of a court or tribunal can only be considered as with grave
abuse of discretion when such act is done in a capricious or whimsical exercise
of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must
be so patent and gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason of passion
and hostility.311 It has also been held that "grave abuse of discretion arises when a
lower court or tribunal patently violates the Constitution, the law or existing
jurisprudence."312

As earlier established, records disclose that the CA's resolutions directing the issuance

141 | P a g e
of the assailed injunctive writs were all hinged on cases enunciating the condonation
doctrine. To recount, the March 16, 2015 Resolution directing the issuance of the
subject TRO was based on the case of Governor Garcia, Jr., while the April 6, 2015
Resolution directing the issuance of the subject WPI was based on the cases
of Aguinaldo, Salalima, Mayor Garcia, and again, Governor Garcia, Jr. Thus, by merely
following settled precedents on the condonation doctrine, which at that time,
unwittingly remained "good law," it cannot be concluded that the CA committed a grave
abuse of discretion based on its legal attribution above. Accordingly, the WPI against
the Ombudsman's preventive suspension order was correctly issued.

With this, the ensuing course of action should have been for the CA to resolve the main
petition for certiorari in CA-G.R. SP No. 139453 on the merits. However, considering
that the Ombudsman, on October 9, 2015, had already found Binay, Jr. administratively
liable and imposed upon him the penalty of dismissal, which carries the accessory
penalty of perpetual disqualification from holding public office, for the present
administrative charges against him, the said CA petition appears to have been
mooted.313 As initially intimated, the preventive suspension order is only an ancillary
issuance that, at its core, serves the purpose of assisting the Office of the Ombudsman
in its investigation. It therefore has no more purpose - and perforce, dissolves - upon
the termination of the office's process of investigation in the instant administrative
case.

F. Exceptions to the mootness principle.

This notwithstanding, this Court deems it apt to clarify that the mootness of the issue
regarding the validity of the preventive suspension order subject of this case does not
preclude any of its foregoing determinations, particularly, its abandonment of the
condonation doctrine. As explained in Belgica, '"the moot and academic principle' is not
a magical formula that can automatically dissuade the Court in resolving a case. The
Court will decide cases, otherwise moot, if: first, there is a grave violation of the
Constitution; second, the exceptional character of the situation and the paramount
public interest is involved; third, when the constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar, and the public;
and fourth, the case is capable of repetition yet evading review."314 All of these
scenarios obtain in this case:

First, it would be a violation of the Court's own duty to uphold and defend the
Constitution if it were not to abandon the condonation doctrine now that its infirmities
have become apparent. As extensively discussed, the continued application of the
condonation doctrine is simply impermissible under the auspices of the present
Constitution which explicitly mandates that public office is a public trust and that public
officials shall be accountable to the people at all times.

Second, the condonation doctrine is a peculiar jurisprudential creation that has

persisted as a defense of elective officials to escape administrative liability. It is the first
time that the legal intricacies of this doctrine have been brought to light; thus, this is a
situation of exceptional character which this Court must ultimately resolve. Further,
since the doctrine has served as a perennial obstacle against exacting public
accountability from the multitude of elective local officials throughout the years, it is
indubitable that paramount public interest is involved.

142 | P a g e
Third, the issue on the validity of the condonation doctrine clearly requires the
formulation of controlling principles to guide the bench, the bar, and the public. The
issue does not only involve an in-depth exegesis of administrative law principles, but
also puts to the forefront of legal discourse the potency of the accountability provisions
of the 1987 Constitution. The Court owes it to the bench, the bar, and the public to
explain how this controversial doctrine came about, and now, its reasons for
abandoning the same in view of its relevance on the parameters of public office.

And fourth, the defense of condonation has been consistently invoked by elective local
officials against the administrative charges filed against them. To provide a sample size,
the Ombudsman has informed the Court that "for the period of July 2013 to December
2014 alone, 85 cases from the Luzon Office and 24 cases from the Central Office were
dismissed on the ground of condonation. Thus, in just one and a half years, over a
hundred cases of alleged misconduct - involving infractions such as dishonesty,
oppression, gross neglect of duty and grave misconduct - were placed beyond the reach
of the Ombudsman's investigatory and prosecutorial powers."315 Evidently, this fortifies
the finding that the case is capable of repetition and must therefore, not evade review.

In any event, the abandonment of a doctrine is wholly within the prerogative of the
Court. As mentioned, it is its own jurisprudential creation and may therefore, pursuant
to its mandate to uphold and defend the Constitution, revoke it notwithstanding
supervening events that render the subject of discussion moot. chanrobleslaw

V.

With all matters pertaining to CA-G.R. SP No. 139453 passed upon, the Court now rules
on the final issue on whether or not the CA's Resolution316 dated March 20, 2015
directing the Ombudsman to comment on Binay, Jr.'s petition for contempt in CA-G.R.
SP No. 139504 is improper and illegal.

The sole premise of the Ombudsman's contention is that, as an impeachable officer, she
cannot be the subject of a charge for indirect contempt317 because this action is criminal
in nature and the penalty therefor would result in her effective removal from
office.318 However, a reading of the aforesaid March 20, 2015 Resolution does not show
that she has already been subjected to contempt proceedings. This issuance, in? fact,
makes it clear that notwithstanding the directive for the Ombudsman to comment, the
CA has not necessarily given due course to Binay, Jr.'s contempt petition:

Without necessarily giving due course to the Petition for Contempt respondents

[Hon. Conchita Carpio Morales, in her capacity as the Ombudsman, and the Department
of Interior and Local Government] are hereby DIRECTED to file Comment on the
Petition/Amended and Supplemental Petition for Contempt (CA-G.R. SP No. 139504)
within an inextendible period of three (3) days from receipt hereof. (Emphasis and
underscoring supplied) ChanRoblesVirtualawlibrary

Thus, even if the Ombudsman accedes to the CA's directive by filing a comment,
wherein she may properly raise her objections to the contempt proceedings by virtue of
her being an impeachable officer, the CA, in the exercise of its sound judicial discretion,
may still opt not to give due course to Binay, Jr.'s contempt petition and accordingly,

143 | P a g e
dismiss the same. Sjmply put, absent any indication that the contempt petition has
been given due course by the CA, it would then be premature for this Court to rule on
the issue. The submission of the Ombudsman on this score is perforce denied.

WHEREFORE, the petition is PARTLY GRANTED. Under the premises of this Decision,

the Court resolves as follows:

(a) the second paragraph of Section 14 of Republic Act No. 6770 is

declared UNCONSTITUTIONAL, while the policy against the issuance of provisional
injunctive writs by courts other than the Supreme Court to enjoin an investigation
conducted by the Office of the Ombudsman under the first paragraph of the said
provision is DECLARED ineffective until the Court adopts the same as part of the rules
of procedure through an administrative circular duly issued therefor; cralawlawlibrary

(b) The condonation doctrine is ABANDONED, but the abandonment

is PROSPECTIVE in effect; cralawlawlibrary

(c) The Court of Appeals (CA) is DIRECTED to act on respondent Jejomar Erwin S.
Binay, Jr.'s (Binay, Jr.) petition for certiorari in CA-G.R. SP No. 139453 in light of the
Office of the Ombudsman's supervening issuance of its Joint Decision dated October 9,
2015 finding Binay, Jr. administratively liable in the six (6) administrative complamts,
docketed as OMB-C-A-15-0058, OMB-C-A-15-0059, OMB-C-A-15-0060, OMB-C-A-15-
0061, OMB-C-A-15-0062, and OMB-C-A-15-0063; and

(d) After the filing of petitioner Ombudsman Conchita Carpio Morales's comment, the
CA is DIRECTED to resolve Binay, Jr.'s petition for contempt in CA-G.R. SP No. 139504
with utmost dispatch.

144 | P a g e
 G.R. No. 182944, November 09, 2016

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), REPRESENTED BY

SEC. HERMOGENES E. EBDANE, JR, AND METROPOLITAN MANILA
DEVELOPMENT AUTHORITY, REPRESENTED BY CHAIRMAN BAYANI F.
FERNANDO, Petitioners, v. CITY ADVERTISING VENTURES CORPORATION,
REPRESENTED BY DEXTER Y. LIM, Respondent.

DECISION

LEONEN, J.:

For a writ of preliminary injunction to be issued, the applicant must show, by prima
facie evidence, an existing right before trial, a material and substantial invasion of this
right, and that a writ of preliminary injunction is necessary to prevent irreparable
injury.

This resolves a Petition for Review on Certiorari1 praying that the assailed December 3,
20072 and May 14, 20083 Resolutions of the Court of Appeals in CA G.R. SP No. 101420
be set aside; and that Branch 66 of the Regional Trial Court of Makati City be prohibited
from conducting further proceedings in Civil Case No. 06-899.4 The Petition also prays
that the Regional Trial Court be ordered to dismiss Civil Case No. 06-899.5

The Court of Appeals' December 3, 2007 Resolution denied petitioners Department of

Public Works and Highways and the Metropolitan Manila Development Authority's
Petition for Certiorari and Prohibition,6 which sought to annul the Regional Trial Court's
November 21, 20067 and April 11, 20078 Orders in Civil Case No. 06-899. The Court of
Appeals' May 14, 2008 Resolution denied the Motion for Reconsideration of the
Department of Public Works and Highways and the Metropolitan Manila Development
Authority.9

The Regional Trial Court's November 21, 2006 Order granted City Advertising Ventures
Corporation's prayer for the issuance of a writ of preliminary injunction in its Complaint
for "Violation of [Administrative Order No.] 160, Tort, [and] Injunction,"10 which was
docketed as Civil Case No. 06-899. The April 11, 2007 Order of the Regional Trial Court
denied the Department of Public Works and Highways and the Metropolitan Manila
Development Authority's Omnibus Motion,11 which sought reconsideration of its
November 21, 2006 Order.

Respondent City Advertising Ventures Corporation is a company engaged in the

advertising business, such as putting up banners and signages within Metro Manila.12

On December 28, 2005, City Advertising Ventures Corporation entered into a lease
agreement with the MERALCO Financing Services Corporation13 for the use of 5,000 of
Manila Electric Company's (MERALCO) lampposts to display advertising

145 | P a g e
banners.14 Under this contract, City Advertising Ventures Corporation obtained sign
permits from Quezon City's Department of Engineering, Office of the Building Official,
Signboard Permit Section.15 It obtained similar permits for the cities of Pasay and
Makati.16 City Advertising Ventures Corporation likewise obtained permits for setting up
pedestrian overpass banners in Quezon City.17

When Typhoon Milenyo hit in September 2006, several billboards in Metro Manila were
blown by strong winds and fell. In its wake, Former President Gloria Macapagal-Arroyo,
through Executive Secretary Eduardo R. Ermita, issued Administrative Order No.
16018 dated October 4, 2006 "[d]irecting the Department of Public Works and Highways
to conduct field investigations, evaluations and assessments of all billboards and
determine those that are hazardous and pose imminent danger to life, health, safety
and property of the general public and to abate and dismantle the same."19 Six (6) days
later, on October 10, 2006, Administrative Order No. 160-A20 was issued,
supplementing Administrative Order No. 160 and "[s]pecifying the legal grounds and
procedures for the prohibition and abatement of billboards and signboards constituting
public nuisance or other violations of law."21

Section 1 of Administrative Order No. 160 laid out instructions to the Department of
Public Works and Highways, as follows:

SECTION 1. Tasks of the DPWH. The DPWH is hereby tasked to:

1.1. Conduct field inspection and determine (a) billboards posing imminent danger or
threat to the life, health, safety and property of the public; (b) billboards violating
applicable laws, rules and regulations; (c) billboards constructed within the easement of
road right-of-way; and (d) billboards constructed without the necessary permit. Priority
shall be given to billboards located along major roads in Metro Manila and other cities
and other national highways and major thoroughfares, as determined by DPWH;

1.2. Upon evaluation and assessment, issue a certification as to those billboards found
to be hazardous and violative of existing standards prescribed by the National Building
Code, Structural Code of the Philippines and other related legal issuances furnishing
copy [sic] of the certification to the LGUs concerned which have jurisdiction over the
location of the billboards;

1.3. Abate and dismantle those billboards, commercial or non-commercial, constructed

on private or public properties found to be falling under any and all grounds
enumerated in paragraph 1.1. above;

1.4. Submit a detailed written report to the Department of Justice (DOJ) to serve as
basis for the possible filing of appropriate civil or criminal cases;

1.5. Call upon the Philippine National Police (PNP) to provide assistance in the
dismantling of billboards and other off-site signs declared as covered under paragraph
1.1. above.22
chanroblesvirtuallawlibrary

Section 2 of Administrative Order No. 160 provided that the Department of Public
Works and Highways shall be assisted by the Metro Manila Development Authority and
by local government units:

146 | P a g e
SECTION 2. Assistance by MMDA and LGUs. The Metropolitan Manila Development
Authority (MMDA) and/or the concerned LGUs are hereby directed to give full support
and assistance to the DPWH for the immediate inspection, assessment and abatement
of billboards found to be hazardous and violative of the National Building Code,
Structural Code of the Philippines and other related issuances.23
chanroblesvirtuallawlibrary

Proceeding from Articles 694,24 695,25  and 69926 of the Civil Code, Administrative Order
cralawred

No. 160-A identified the remedies available to the Department of Public Works and
Highways:

SECTION 4. Remedies Against Public Nuisance. Pursuant to Article 699 of the Civil
Code, in relation to AO No. 160, dated October 4, 2006, the Department of Public
Works and Highways (DPWH), through its Secretary, with the help of the Metropolitan
Manila Development Authority (MMDA), and the various local government units (LGUs),
through the local Building Officials, shall take care that one or all of the following
remedies against public nuisances are availed of:

(a) A prosecution under the Revised Penal Code or any local ordinance; or
(b) A civil action; or
(c) Abatement, without judicial proceedings, if the local Building Official determines that
this is the best remedy under the circumstances.27
chanroblesvirtuallawlibrary

On October 6, 2006, the Department of Public Works and Highways announced that
they would start dismantling billboards.28 During its operations, it was able to remove
250 of City Advertising Ventures Corporation's lamppost banners and frames, 12
pedestrian overpass banners, 17 pedestrian overpass frames, and 36 halogen lamps.29

City Advertising Ventures Corporation then filed before the Regional Trial Court of
Makati City its Complaint for "Violation of [Administrative Order No.] 160, Tort, [and]
Injunction with Prayer for [Temporary Restraining Order], Preliminary Injunction, and
Preliminary Mandatory Injunction"30 dated October 18, 2006.

Asserting that Administrative Order No. 160 pertained specifically to "billboards" (i.e.,
"large panel[s] that carr[y] outdoor advertising") and not to small advertising fixtures
such as its signages and banners, City Advertising Ventures Corporation claimed that
the Department of Public Works and Highways exceeded its authority when it
dismantled its banners and other fixtures.31 It also claimed that the Department of
Public Works and Highways "seriously impeded the pursuit of [its] legitimate business
and ... unlawfully deprived [it] of property, income and income opportunities ... without
due process of law,"32 violated Articles 19,33 20,34 2135 and 32(2), (6), and (8)36 of the
Civil Code, and impaired contractual obligations.37

After conducting summary hearings on October 25 and 30, 2006, Branch 66 of the
Regional Trial Court of Makati City issued the Order38 dated October 31, 2006 granting
City Advertising Ventures Corporation's prayer for a temporary restraining order. This
Order stated:

147 | P a g e
Such being the case, the Court is left with no recourse but to GRANT the Temporary
Restraining Order from [sic] a period of twenty (20) days from today.

ACCORDINGLY, the defendants are hereby restrained from further removing,

dismantling, and confiscating any of plaintiff's lamppost and pedestrian overpass
banners.

In the meantime, let the hearing on the plaintiff's application for Writ of Preliminary
Injunction [be set] on November 8, 2006 at 2:00 p.m.

Let a copy of this order be served upon the defendants at the expense of the plaintiff
through the Process Server of this Court.

SO ORDERED.39
chanroblesvirtuallawlibrary

In the Order40 dated November 21, 2006, the Regional Trial Court granted City
Advertising Ventures Corporation's prayer for the issuance of a writ of preliminary
injunction:

Wherefore, plaintiff's prayer for the issuance of a writ or preliminary injunction is

granted. Accordingly, let a writ of injunction issue upon the filing by the plaintiff of a
bond in the amount of PESOS ONE HUNDRED THOUSAND (P100,000.00) executed to
the defendants to the effect that the plaintiff will pay all damages defendants may
suffer by reason of this injunction should the Court finally decide that the plaintiff is not
entitled thereto. The defendants, their agents and representatives are hereby ordered
to cease and desist from further removing, dismantling and confiscating any of
plaintiff's lamppost and pedestrian overpass banners.

Let the hearing on the main case be set on January 23, 2006 [sic] at 8:30 in the
morning.

SO ORDERED.41
chanroblesvirtuallawlibrary

In response, the Department of Public Works and Highways and the Metropolitan Manila
Development Authority filed an Omnibus Motion for Reconsideration and Clarification of
the November 21, 2006 Order and for the Dissolution of the Writ of Preliminary
Injunction.42 They asserted that City Advertising Ventures Corporation failed to show a
clear legal right worthy of protection and that it did not stand to suffer grave and
irreparable injury.43 They likewise asserted that the Regional Trial Court exceeded its
authority in issuing a writ of preliminary injunction.44

In the Order45 dated April 11, 2007, the Regional Trial Court denied the Omnibus
Motion.

Thereafter, the Department of Public Works and Highways and the Metropolitan Manila
Department Authority filed before the Court of Appeals a Petition for Certiorari and
Prohibition.46 In its assailed December 3, 2007 Resolution,47 the Court of Appeals denied
the Petition. In its assailed May 14, 2008 Resolution,48 the Court of Appeals denied the
Motion for Reconsideration.

148 | P a g e
Hence, this Petition49 was filed.

On November 3, 2008, respondent City Advertising Ventures Corporation filed its

Comment.50 On April 14, 2009, petitioners filed their Reply.51

In the Resolution52 dated July 7, 2010, this Court issued a temporary restraining order
enjoining the implementation of the Regional Trial Court's November 21, 2006 and April
11, 2007 Orders, as well as of a subsequent May 21, 2010 Order, which reiterated the
trial court's November 21, 2006 and April 11, 2007 Orders.

For resolution is the sole issue of whether the Regional Trial Court gravely abused its
discretion in issuing its November 21, 2006 and April 11, 2007 Orders.

After seeking relief from the Court of Appeals through the remedy of a petition for
certiorari and prohibition under Rule 65 of the 1997 Rules of Civil Procedure, petitioners
come to this Court through a petition for review on certiorari under Rule 45. The
distinctions between Rule 65 and Rule 45 petitions have long been settled. A Rule 65
petition is an original action, independent of the action from which the assailed ruling
arose. A Rule 45 petition, on the other hand, is a mode of appeal. As such, it is a
continuation of the case subject of the appeal. In Sy v. Commission on Settlement of
Land Problems:53

[T]he remedy of certiorari under Rule 65 is not a component of the appeal process. It is
an original and independent action that is not a part of the trial which resulted in the
rendition of the judgment complained of. In contrast, the exercise of our appellate
jurisdiction refers to a process which is but a continuation of the original suit.54
chanroblesvirtuallawlibrary

As it is a mere continuation, a Rule 45 petition (apart from being limited to questions of

law) cannot go beyond the issues that were subject of the original action giving rise to
it. This is consistent with the basic precept that:

As a rule, no question will be entertained on appeal unless it has been raised in the
court below. Points of law, theories, issues and arguments not brought to the attention
of the lower court need not be, and ordinarily will not be, considered by a reviewing
court, as they cannot be raised for the first time at that late stage. Basic considerations
of due process impel this rule.55
chanroblesvirtuallawlibrary

Rule 45 petitions engendered by prior Rule 65 petitions for certiorari and/or prohibition
are, therefore, bound by the same basic issue at the crux of the prior Rule 65 petition,
that is, "issues of jurisdiction or grave abuse of discretion." 56 When Rule 45 petitions
are brought before this Court, they remain tethered to the "sole office"57 of the original
action to which they owe their existence: "the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of
jurisdiction."58

When petitioners sought relief from the Court of Appeals, what they sought to remedy
was the Regional Trial Court's issuance of its November 21, 2006 and April 11, 2007

149 | P a g e
Orders. These were interlocutory orders pertaining to a temporary relief extended to
respondent, that is, a writ of preliminary injunction. These orders were not judgments
that completely disposed of Civil Case No. 06-899. They were not the Regional Trial
Court's final ruling on Civil Case No. 06-899. By the time petitioners sought redress
from the Court of Appeals (and even at the time of the filing of their appeal before this
Court), the Regional Trial Court had not yet even ruled on the merits of Civil Case No.
06-899.

The question before the Court of Appeals was, therefore, limited to the matter of
whether the Regional Trial Court's issuance of a writ of preliminary injunction was
tainted with grave abuse of discretion. On appeal from the original action brought
before the Court of Appeals, it is this same, singular issue that confronts us.

This Court cannot, at this juncture, entertain petitioners' prayer that the Regional Trial
Court be ordered to dismiss Civil Case No. 06-899. Ruling on the complete cessation of
a civil action on grounds other than those permitted by Rule 1659 of the 1997 Rules of
Civil Procedure (on motions to dismiss filed before the filing of an answer and before
the conduct of trial; on grounds such as supervening events that render a pending
action moot, unlitigable; or on grounds that render relief impracticable or impossible)
compels an examination of the merits of a case. The case must then be litigated—
through trial, reception of evidence, and examination of witnesses. This entire process
will be frustrated were this Court to rule on Civil Case No. 06-899's dismissal on the
basis only of allegations made in reference to provisional relief extended before trial
even started.

In ruling on the propriety of the Regional Trial Court's issuance of a writ of preliminary
injunction, both the Court of Appeals and this Court are to be guided by the established
standard on what constitutes grave abuse of discretion:

By grave abuse of discretion is meant capricious and whimsical exercise of judgment as

is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be
grave abuse of discretion as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and so gross
as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law.60
chanroblesvirtuallawlibrary

The sole question, then, is whether the Regional Trial Court, in issuing a writ of
preliminary injunction in favor of respondent, acted in a manner that was practically
bereft of or violative of legally acceptable standards.

We turn to the basic principles governing the Issuance of writs of preliminary

injunction.

II

A writ of preliminary injunction is issued in order to:

[P]revent threatened or continuous irremediable injury to some of the parties before

their claims can be thoroughly studied and adjudicated.  Its sole aim is to preserve the

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status quo until the merits of the case can be heard fully[.] Thus, it will be issued only
upon a showing of a clear and unmistakable right that is violated. Moreover, an urgent
necessity for its issuance must be shown by the applicant.61 (Emphasis supplied)
cralawlawlibrary

Rule 58, Section 3 of the 1997 Rules of Civil Procedure identifies the instances when a
writ of preliminary injunction may be issued:

Section 3. Grounds for issuance of preliminary injunction. — A preliminary injunction

may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained of, or
in requiring the performance of an act or acts either for a limited period or perpetually;
   
(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or
   
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.
chanroblesvirtuallawlibrary

As Marquez v. Sanchez62 summarized, "the requisites of preliminary injunction whether

mandatory or prohibitory are the following":

(1) the applicant must have a clear and unmistakable right, that is a right in esse;
   
(2) there is a material and substantial invasion of such right;
   
(3) there is an urgent need for the writ to prevent irreparable injury to the applicant; and
   
(4) no other ordinary, speedy, and adequate remedy exists to prevent the infliction of
irreparable injury.63 (Emphasis in the original)
chanroblesvirtuallawlibrary

In satisfying these requisites, parties applying for a writ of preliminary injunction need
not set out their claims by complete and conclusive evidence. Prima facie evidence
suffices:

It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicant's rights or
interests in the subject matter of the main action. It is not required that the applicant
should conclusively show that there was a violation of his rights as this issue will still be

151 | P a g e
fully litigated in the main case. Thus, an applicant for a writ is required only to show
that he has an ostensible right to the final relief prayed for in his complaint.64 
(Emphasis supplied)
chanroblesvirtuallawlibrary

Spouses Nisce v. Equitable PCI Bank65 discussed the requisites, vis-a-vis the proof
required, for issuing a writ of preliminary injunction:

The plaintiff praying for a writ of preliminary injunction must further establish that he or
she has a present and unmistakable right to be protected; that the facts against which
injunction is directed violate such right; and there is a special and paramount necessity
for the writ to prevent serious damages. In the absence of proof of a legal right and the
injury sustained by the plaintiff, an order for the issuance of a writ of preliminary
injunction will be nullified. Thus, where the plaintiff's right is doubtful or disputed, a
preliminary injunction is not proper. The possibility of irreparable damage without proof
of an actual existing right is not a ground for a preliminary injunction.

However, to establish the essential requisites for a preliminary injunction, the evidence
to be submitted by the plaintiff need not be conclusive and complete. The plaintiffs are
only required to show that they have an ostensible right to the final relief prayed for in
their complaint. A writ of preliminary injunction is generally based solely on initial or
incomplete evidence. Such evidence need only be a sampling intended merely to give
the court an evidence of justification for a preliminary injunction pending the decision
on the merits of the case, and is not conclusive of the principal action which has yet to
be decided.66
chanroblesvirtuallawlibrary

Clearly, a writ of preliminary injunction is an ancillary and interlocutory order issued as

a result of an impartial determination of the context of both parties. It entails a
procedure for the judge to assess whether the reliefs prayed for by the complainant will
be rendered moot simply as a result of the parties' having to go through the full
requirements of a case being fully heard on its merits. Although a trial court judge is
given a latitude of discretion, he or she cannot grant a writ of injunction if there is no
clear legal right materially and substantially breached from a prima facie evaluation of
the evidence of the complainant. Even if this is present, the trial court must satisfy
itself that the injury to be suffered is irreparable.

III

Respondent satisfied the standards for the issuance of a writ of preliminary injunction.
The Regional Trial Court acted in keeping with these standards and did not gravely
abuse its discretion in extending temporary relief to respondent.

III.A

Petitioners have conceded that respondent entered into a lease agreement enabling the
latter to use MERALCO's lampposts to display advertising banners.67 Respondent
obtained permits from the local government units of Makati, Pasay, and Quezon City so
that it could put up banners and signages on lampposts and pedestrian overpasses.68

152 | P a g e
There was no allegation nor contrary proof "[t]hat the ordinary course of business has
been followed."69 Respondent must have obtained the customary permits and
clearances (e.g., Mayor's and business permits as well as registration with the
Securities and Exchange Commission and with the Bureau of Internal Revenue)
necessary to make itself a going concern.

Respondent's lease agreement with MERALCO Financing Services  Corporation and its
having secured permits from local government units, for the specific purpose of putting
up advertising banners and signages, gave it the right to put up such banners and
signages. Respondent had in its favor a property right, of which it cannot be deprived
without due process. This is respondent's right in esse,  that is, an actual right. It is not
merely a right in posse, or a potential right.

III.B

Petitioners counter that respondent had no right to put up banners and signages. They
point out that on September 2, 2004, the Metro Manila Council passed MMDA
Regulation No. 04-004, "[p]rescribing guidelines on the installation and display of
billboards and advertising signs along major and secondary thoroughfares, avenues,
streets, roads, parks and open spaces within Metro Manila and providing penalties for
violation thereof."70

Section 13 of this Regulation identified the officers responsible for issuing clearances for
the installation of "billboards/signages and advertising signs," as follows:

Section 13. The MMDA, thru the Chairman or his duly authorized representative, shall
be the approving authority in the issuance of clearance in the installation of
billboards/signboards and advertising signs along major thoroughfares of Metro Manila.
Upon securing clearance from the MMDA, a permit from the Local Government Unit
must be secured. (The list of major thoroughfares is hereto attached as Appendix A of
this Regulation).

The City/Municipal Mayor or his duly authorized representative shall be the approving
authority in the issuance of permit for the installation/posting billboards/signboards and
advertising signs along local roads and private properties of Metro Manila.
chanroblesvirtuallawlibrary

Petitioners claim that the dismantling of respondent's banners and signages was "[f]or
want of the required MMDA clearance(s) ... and for other violation[s] of MMDA
Regulation No. 04-004."71 Petitioners also counter that "sidewalk and streetlight posts
are outside the commerce of men"72 and, therefore, cannot be spaces for respondent's
commercial activities. They also claim that respondent's contract with MERALCO
Financing Services Corporation has since expired.73 Petitioners likewise underscore that
the right to non-impairment of contracts "is limited by the exercise of the police power
of the State, in the interest of public health, safety, morals and general welfare."74

Petitioners may subsequently and after trial prove that they are correct. A more
thorough examination of prevailing laws, ordinances, and pertinent regulations may
later on establish that the use of lampposts and pedestrian overpasses as platforms for
visual advertisements advancing private commercial interests contradict the public

153 | P a g e
character of certain spaces. Likewise, petitioners did subsequently adduce evidence
that, by December 29, 2006, respondent's contract with MERALCO Financing Services
Corporation had expired.75 After trial, it may later on be found that respondent's
proprietary interest may be trumped by the general welfare.

However, at the point when the Regional Trial Court was confronted with respondents
prayer for temporary relief, all that respondent needed was a right ostensibly in
existence. Precisely, a writ of preliminary injunction is issued "before [parties'] claims
can be thoroughly studied and adjudicated."76

MMDA Regulation No. 04-004's clearance requirements appear to stand in contrast with
the permits obtained by respondent from the local government units of Makati, Pasay,
and Quezon City. Whether the permits suffice by themselves, or whether respondent's
alleged non-compliance with MMDA Regulation No. 04-004 is fatal to its cause, are
matters better resolved by a process more painstaking than the summary hearings
conducted purely for the purpose of extending provisional remedy.

The phrase "outside the commerce of men"77 is not an incantation that can be invoked
to instantly establish the accuracy of petitioners' claims. 'Public spaces' are not a
monolithic, homogenous mass that is impervious to private activity. Determining
whether the specific locations where respondent conducts its business is absolutely
excluded from commercial activity requires more rigorous fact-finding and analysis.

Although "public health, safety, morals and general welfare"78 may justify intrusion into
private commercial interests, the exercise of police power entails considerations of due
process, fitness, and propriety. Even when these considerations are invoked, they do
not peremptorily and invariably set aside private property rights. When acting in view of
these considerations, state organs must still do so with restraint and act only to the
extent reasonably necessary. Whether state organs actually did so is something that
can only be adjudged when the competing claims of the State and of private entities
are conscientiously and deliberately appraised.

Even by petitioners' own allegation, the expiration of respondent's lease agreement

with MERALCO Financing Services Corporation did not happen until after November 21,
2006, when the Regional Trial Court issued the contentious writ of preliminary
injunction.79 It was a subsequent fact, which could have only been proven later during
trial, and which was still inefficacious when respondent pleaded for provisional relief.

Petitioners' own arguments demonstrate the need for litigation—a thorough study and
adjudication—of the parties' competing claims. When the Regional Trial Court extended
provisional relief on November 21, 2006, it did not yet have the benefit of exhaustive
litigation. That it acted without such benefit is not something for which it can be
faulted. It did not gravely abuse its discretion then, because it did not yet need to
engage in full litigation.

III.C

Turning to the other requisites for the issuance of a writ of preliminary injunction, we
find that respondent adequately averred and showed a material and substantial

154 | P a g e
invasion of its ostensible right, for which the writ or preliminary injunction was
necessary lest that invasion persist and it be made to suffer irreparable injury.

As respondent pointed out, the filing of its Complaint was precipitated by the removal of
no less than 250 of its lamppost banners and frames, as well as 12 of its pedestrian
overpass banners, 17 pedestrian overpass frames, and 36 halogen lamps.80 All these
were done in the span of less than two (2) weeks.81 Petitioners do not dispute this.
Moreover, nowhere does it appear that petitioners intended to restrict themselves to
these 250 lamppost banners and frames, 12 pedestrian overpass banners, 17
pedestrian overpass frames, and 36 halogen lamps. On the contrary, their incessant
attempts at having the Regional Trial Court's writ of preliminary injunction lifted—first,
on reconsideration at the Regional Trial Court itself; next, on certiorari and prohibition,
and later, on reconsideration at the Court of Appeals; then, on appeal before this Court;
and still later, on their June 15, 2010 Motion before this Court—are indicative of their
sheer resolve to dismantle more. Respondent was left with no justifiable recourse but to
seek relief from our courts.

Petitioners' admitted and pronounced course of action directly obstructed respondent's

ability to avail itself of its rights under its lease agreement and the permits it secured
from local government units. What petitioners sought to restrict was the very essence
of respondent's activity as a business engaged in advertising via banners and signages.
As the Regional Trial Court explained in its April 11, 2007 Order:

It bears stressing that the lifeblood of a business rests on effective advertising

strategies. One of which is the posting of billboards and signages at strategic places.
The manner of posting may be regulated by the government but must comply with
certain requirements, and should not result in taking of property without due process or
in wanton disregard of existing laws. It stands to reason that [petitioners] are not
vested with blanket authority to confiscate billboards without warning and in violation of
existing laws.82

IV

Administrative Order No. 160's mere existence, absent a showing of compliance with its
instructions, gives no solace to petitioners. Administrative Order No. 160 expressed the
Chief Executive's general directive for the abatement of billboards that pose a hazard to
the general welfare. In doing so, it did not give petitioner Department of Public Works
and Highways unbridled authority to dismantle all billboards and signages.
Administrative Order No. 160 prescribed a well-defined process for the carrying out of
petitioner Department of Public Works and Highways' functions. Before any such
abatement and dismantling—as permitted by paragraph 1.3—paragraphs 1.1 and 1.2 of
Administrative Order No. 160 require the Department of Public Works and Highways to:
first, conduct field inspections; second, make evaluations and assessments; third, issue
certifications as to those billboards found to be hazardous and violative of existing
standards; and fourth, furnish copies of these certifications to concerned local
government units.

Six (6) days after it was issued, Administrative Order No. 160 was supplemented by
Administrative Order No. 160-A.83 This subsequent issuance recognized that hazardous

155 | P a g e
billboards are public nuisances.84 Thus, in its Section 4, it prescribed remedies
consistent with Article 699 of the Civil Code:

(a) A prosecution under the Revised Penal Code or any local ordinance; or
(b) A civil action; or
(c) Abatement, without judicial proceedings, if the local Building Official determines that
this is the best remedy under the circumstances.85
chanroblesvirtuallawlibrary

In its October 31, 2006 Order, which issued an initial 20-day temporary restraining
order in favor of respondent, the Regional Trial Court emphasized that despite the
opportunity extended to petitioners (in the October 25 and 30, 2006 summary
hearings) to present evidence of their compliance with paragraphs 1.1 and 1.2 of
Administrative Order No. 160, with Section 4 of Administrative Order No. 160-A, or with
Article 699 of the Civil Code, petitioners failed to show any such evidence.86 From all
indications, petitioners proceeded to dismantle respondent's banners and signages
without having first completed formal or systematic field inspections, as well as
evaluations and assessments, and without having first issued written certifications and
furnished local government units with copies of these certifications. In the 12-day span
between petitioner Department of Public Works and Highways' October 6, 2006
announcement that it would start dismantling billboards, and respondent's October 18,
2006 Complaint, petitioners managed to dismantle a considerable number of
respondent's banners and signages while apparently ignoring the same regulations from
which they drew their authority:

So far, no evidence has been presented by the [petitioners] to the satisfaction of this
Court that they had strictly observed the procedure laid down by Administrative Order
No. 160 and prescribed by law for the abatement of billboards and signboards found to
have been a public nuisance before carrying their tasks of dismantling the banners and
other temporary signages belonging to [respondent].87
chanroblesvirtuallawlibrary

In its November 21, 2006 Order, the Regional Trial Court reiterated that petitioners had
yet to adduce proof of their prior compliance with paragraphs 1.1 and 1.2 of
Administrative Order No. 160, with Section 4 of Administrative Order No. 160-A, or with
Article 699 of the Civil Code. This, even after the conduct of another hearing on
November 8, 2006:88

The Court finds that the continuous removal and destruction of [respondent's]
billboards without due notice and without following the procedure provided under the
law. No price can be placed on the deprivation of a person's right to his property
without due process of law.

The New Civil Code provides for remedies against a public nuisance which
[respondent's] billboards are classified by [petitioners].

Article 699 of the New Civil Code provides that a public nuisance [may be] prosecuted
under the penal code or any local ordinance, by civil action or by abatement. The
district health officer if required to determine whether or not abatement, without
judicial proceedings, is the best remedy against a public nuisance. Any private person
may abate a public nuisance which is specially injurious to him by removing or if
necessary, by destroying the thing which constitutes the same, without committing a

156 | P a g e
breach of the peace, or doing unnecessary injury. But it is necessary: (1) That demand
be first made upon the owner or possessor of the property to abate the nuisance; (2)
That such demand has been rejected; (3) That the abatement be approved by the
district health officer and executed with the assistance of the local police[; and] (4)
That the value of the destruction does not exceed three thousand pesos.

However, as found by the Court in the Order granting the temporary restraining order,
no evidence was presented by [petitioners] to prove that they had strictly observed the
procedure laid down by Administrative Order No. 160 or the provisions of the New Civil
Code on abatement of public nuisance.89
chanroblesvirtuallawlibrary

In its April 11, 2007 Order, the Regional Trial Court again emphasized the utter lack of
such proof from petitioners:90

The Court maintains [that] there is no justifiable reason to dissolve the issued
preliminary injunction. The fact remains that [petitioners] disregarded the minimum
requirements of due process under Administrative Order [No.] 160 when they
dismantled [respondent's] banners duly licensed by the local government concerned
and covered by a legitimate agreement with MERALCO. No proof was shown by
[petitioners] that they had complied with the requirements of [Administrative Order
No.] 160 particularly as to the evaluation and certification process prior to the
dismantling, or to the creation of a task force, or at least a finding that said banners or
[respondent] are nuisances or hazardous. Worse, they jumped right into abatement,
skipping initial investigatory stages and the all-important feature that id due process.91
chanroblesvirtuallawlibrary

The Court of Appeals' assailed December 3, 2007 Resolution drew attention to

petitioners' failure to show proof of such compliance.92 Even now, in their Petition for
Review on Certiorari before us, petitioners make no reference whatsoever to satisfying
Administrative Order No. 160's, 160-A's, and the Civil Code's procedural requisites.

Even if it were to be assumed that Administrative Order No. 160's and 160-A's
procedural requirements completely and impeccably satisfy the standards of due
process, it remains that petitioners have not shown that they complied with these
administrative mechanisms. Their complete and protracted silence on this compliance is
glaring. It would have been easy for them to simply state that they have complied with
the same instrument from which they are drawing their authority. Petitioners' utter
inability to even make any such allegation, let alone to offer proof of compliance with
Administrative Order No. 160's and 160-A's due process safeguards is detrimental to
their cause.

Petitioners' final bid at securing this Court's favor is through a reference to Republic Act
No. 8975.93 Section 3 of Republic Act No. 8975 provides:

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary

Injunctions and Preliminary Mandatory Injunctions. - No court, except the Supreme
Court, shall issue any temporary restraining order, preliminary injunction or preliminary
mandatory injunction against the government, or any of its subdivisions, officials or any

157 | P a g e
person or entity, whether public or private, acting under the government's direction, to
restrain, prohibit or compel the following acts:

(a) Acquisition, clearance and development of the right-of-way and/or site or location of any
national government project;
(b) Bidding or awarding of contract/project of the national government as defined under
Section 2 hereof;
(c) Commencement, prosecution, execution, implementation, operation of any such contract
or project;
(d) Termination or rescission of any such contract/project; and
(e) The undertaking or authorization of any other lawful activity necessary for such
contract/project.
chanroblesvirtuallawlibrary

This prohibition shall apply in all cases, disputes or controversies instituted by a private
party, including but not limited to cases filed by bidders or those claiming to have rights
through such bidders involving such contract/project. This prohibition shall not apply
when the matter is of extreme urgency involving a constitutional issue, such that unless
a temporary restraining order is issued, grave injustice and irreparable injury will arise.
The applicant shall file a bond, in an amount to be fixed by the court, which bond shall
accrue in favor of the government if the court should finally decide that the applicant
was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the
court may, if appropriate under the circumstances, award the contract to the qualified
and winning bidder or order a rebidding of the same, without prejudice to any liability
that the guilty party may incur under existing laws.
chanroblesvirtuallawlibrary

Petitioners claim that Republic Act No. 8975's prohibition applies to their efforts to
protect the public's welfare by dismantling billboards.94

Republic Act No. 8975 was enacted to "ensure the expeditious and efficient
implementation and completion of government infrastructure projects,"95 specifically for
the purposes of "avoid[ing] unnecessary increase in construction, maintenance and/or
repair costs and to immediately enjoy the social and economic benefits therefrom."96 Its
scope and aims are clear.

Removing or dismantling billboards, banners, and signages cannot qualify as acts

relating to the implementation and completion of "government infrastructure projects,"
or of "national government projects"97 within the contemplation of Republic Act No.
8975. They do not involve the construction, operation, maintenance, repair, or
rehabilitation of structures for public use. Neither do they involve the acquisition,
supply, or installation of equipment and materials relating to such structures; nor the
reduction of costs or the facilitation of public utility. What they entail are preventive and
even confiscatory mechanisms. Moreover, while it is also true that public taking may be
a prelude to the completion of facilities for public use (e.g., expropriation for
infrastructure projects), petitioners' removal and confiscation here do not serve that

158 | P a g e
specific end. Rather, they serve the overarching interest of public safety.

Petitioners prevented and threatened to prevent respondent from engaging in its

cardinal business activity. Their admitted actions and apparent inactions show that the
well-defined due process mechanisms outlined by Administrative Order No. 160 and
160-A were not followed. Confronted with acts seemingly tantamount to deprivation of
property without due process of law, the Regional Trial Court acted well within its
competence when it required petitioners to temporarily desist, pending a more
complete and circumspect estimation of the parties' rights.

WHEREFORE, the Petition is DENIED. The assailed December 3, 2007 and May 14,

2008 Resolutions of the Court of Appeals in CA-G.R. SP No. 101420
are AFFIRMED without prejudice to the ultimate disposition of Civil Case No. 06-899.

The temporary restraining order dated July 7, 2010 is LIFTED.

SO ORDERED.  Cralawlawlibrary

159 | P a g e
 EN BANC

G.R. No. 202836, June 19, 2018

FIRST SARMIENTO PROPERTY HOLDINGS, INC., Petitioner, v. PHILIPPINE BANK

OF COMMUNICATIONS, Respondent.

DECISION

LEONEN, J.:

To determine the nature of an action, whether or not its subject matter is capable or
incapable of pecuniary estimation, the nature of the principal action or relief sought
must be ascertained. If the principal relief is for the recovery of a sum of money or real
property, then the action is capable of pecuniary estimation. However, if the principal
relief sought is not for the recovery of sum of money or real property, even if a claim
over a sum of money or real property results as a consequence of the principal relief,
the action is incapable of pecuniary estimation.

This resolves the Petition for Review1 filed by First Sarmiento Property Holdings, Inc.
(First Sarmiento) assailing the April 3, 2012 Decision2 and July 25, 2012 Order3 of
Branch 11, Regional Trial Court, Malolos City, Bulacan in Civil Case No. 04-M-2012.

The facts as established by the parties are as follows:

On June 19, 2002,4 First Sarmiento obtained from Philippine Bank of Communications

(PBCOM) a P40,000,000.00 loan, which was secured by a real estate mortgage5 over
1,076 parcels of land.6

On March 15, 2003,7 the loan agreement was amended8 with the increase of the loan
amount to P51,200,000.00. On September 15, 2003, the loan agreement was further
amended9 when the loan amount was increased to P100,000,000.00.

On January 2, 2006,10 PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate

Mortgage.11 It claimed in its Petition that it sent First Sarmiento several demand letters,
yet First Sarmiento still failed to pay the principal amount and accrued interest on the
loan. This prompted PBCOM to resort to extrajudicial foreclosure of the mortgaged
properties, a recourse granted to it under the loan agreement.12

On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of
real estate mortgage with the Regional Trial Court. However, the Clerk of Court refused
to accept the Complaint in the absence of the mortgaged properties' tax declarations,
which would be used to assess the docket fees.13

On December 29, 2011, Executive Judge Renato C. Francisco (Judge Francisco), First
Vice-Executive Judge Ma. Theresa A. Mendoza Arcega, Second Vice-Executive Judge
Ma. Belen R. Liban, and Third Vice-Executive Judge Basilio R. Gabo, Jr. of the Regional
Trial Court of City of Malolos, Bulacan, granted First Sarmiento's Urgent Motion to
Consider the Value of Subject Matter of the Complaint as Not Capable of Pecuniary

160 | P a g e
Estimation, and ruled that First Sarmiento's action for annulment of real estate
mortgage was incapable of pecuniary estimation.14

Also on December 29, 2011, the mortgaged properties were auctioned and sold to
PBCOM as the highest bidder.15

On January 2, 2012, First Sarmiento filed a Complaint for annulment of real estate
mortgage and its amendments, with prayer for the issuance of temporary restraining
order and preliminary injunction.16 It paid a filing fee of P5,545.00.17

First Sarmiento claimed in its Complaint that it never received the loan proceeds of
P100,000,000.00 from PBCOM, yet the latter still sought the extrajudicial foreclosure of
real estate mortgage. It prayed for the issuance of a temporary restraining order and
preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the
foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM's
favor with the Registry of Deeds of Bulacan.18

That same day, Judge Francisco issued an ex-parte temporary restraining order for 72
hours, enjoining the registration of the certificate of sale with the Registry of Deeds of
Bulacan.19

On January 4, 2012, the Regional Trial Court directed the parties to observe the status
quo ante.20

On January 24, 2012, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan
issued a certificate of sale to PBCOM.21

In its Opposition (Re: Application for Issuance of Temporary Restraining

Order),22 PBCOM asserted that the Regional Trial Court failed to acquire jurisdiction over
First Sarmiento's Complaint because the action for annulment of mortgage was a real
action; thus, the filing fees filed should have been based on the fair market value of the
mortgaged properties.23

PBCOM also pointed out that the Regional Trial Court's directive to maintain the status
quo order beyond 72 hours constituted an indefinite extension of the temporary
restraining order, a clear contravention of the rules.24

On April 3, 2012, Branch 11, Regional Trial Court,25 Malolos City, Bulacan dismissed the
Complaint for lack of jurisdiction:

Following the High Court's ruling in the case of Home Guaranty Corporation v. R. II
Builders, Inc. and National Housing Authority, G.R. No. 192549, March 9, 2011, cited
by the bank in its Rejoinder, which appears to be the latest jurisprudence on the matter
to the effect that an action for annulment or rescission of contract does not operate to
efface the true objective and nature of the action which is to recover real property, this
Court hereby RESOLVES TO DISMISS the instant case for lack of jurisdiction, plaintiff
having failed to pay the appropriate filing fees.

Accordingly, the instant case is hereby DISMISSED.

161 | P a g e
SO ORDERED.26
On July 25, 2012, the Regional Trial Court27 denied First Sarmiento's motion for
reconsideration.28

On August 17, 2012, First Sarmiento sought direct recourse to this Court with its
Petition for Review29 under Rule 45. It insists that its Complaint for the annulment of
real estate mortgage was incapable of pecuniary estimation.30 It points out that the
Executive Judge and Vice-Executive Judges of the Regional Trial Court likewise
acknowledged that its action was incapable of pecuniary estimation.31

Petitioner highlights that the Supreme Court En Banc in Lu v. Lu Ym held "that an

action for declaration of nullity of issuance of shares or an action questioning the
legality of a conveyance is one not capable of pecuniary estimation."32 Furthermore,
petitioner maintains that the Supreme Court En Banc in Bunayog v. Tunas also
established that a complaint questioning the validity of a mortgage is an action
incapable of pecuniary estimation.33

It emphasizes that Home Guaranty Corporation v. R-II Builders, which the Regional

Trial Court relied on to dismiss its complaint for lack of jurisdiction, was rendered by a
division of the Supreme Court; hence, it cannot modify or reverse a doctrine or
principle of law laid down by the Supreme Court En Banc.34

On September 19, 2012,35 this Court directed respondent PBCOM to comment on the

petition.

In its Comment,36 respondent contends that petitioner's action to annul the real estate
mortgage and enjoin the foreclosure proceedings did not hide the true objective of the
action, which is to restore petitioner's ownership of the foreclosed properties.37

Respondent maintains that this Court has already settled that "a complaint for
cancellation of sale which prayed for both permanent and preliminary injunction aimed
at the restoration of possession of the land in litigation is a real action."38

It likewise stresses that since petitioner's primary objective in filing its Complaint was
to prevent the scheduled foreclosure proceedings over the mortgaged properties and
the conveyance of their ownership to the highest bidder, the case was a real action.39

Finally, it denies that Home Guaranty Corporation modified and reversed Lu v. Lu

Ym because the factual and legal milieus of these two (2) cases were different.40

On November 26, 2012,41 this Court required petitioner to file a reply to the comment.

On February 1, 2013, petitioner filed its Reply42 where it denies that its Complaint was
for the annulment of the foreclosure sale, because when it filed its Complaint, the
foreclosure sale had not yet happened.43

It proclaims that its Complaint sought the removal of the lien on the mortgaged
properties and was not intended to recover ownership or possession since it was still
the registered owner with possession of the mortgaged properties when it filed its

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Complaint.44

On February 27, 2013,45 this Court noted petitioner's reply and directed the parties to
submit their respective memoranda.

On May 30, 2013, the parties filed their respective memoranda.46

In its Memorandum,47 petitioner continues to insist that it did not receive the loan
proceeds from PBCOM which is why it filed its Complaint for annulment of real estate
mortgage in response to the latter's Petition for Extrajudicial Foreclosure of Real Estate
Mortgage.48

Petitioner reiterates that its Complaint for annulment of real estate mortgage was an
action incapable of pecuniary estimation because it merely sought to remove the lien on
its properties, not the recovery or reconveyance of the mortgaged properties.49

It states that it never expressly or impliedly sought the conveyance of the mortgaged
properties because it was still the registered owner of the mortgaged properties when
its Complaint was first presented for filing with the Clerk of Court.50

On the other hand, respondent in its Memorandum51 restates its stand that petitioner's
Complaint involved a real action; hence, the estimated value of the mortgaged
properties should have been alleged and used as the basis for the computation of the
docket fees.52

Respondent claims that the allegations in petitioner's Complaint reveal the latter's real
intention to assert its title and recover the real properties sold at the public auction.53

The only issue for this Court's resolution is whether or not the Regional Trial Court
obtained jurisdiction over First Sarmiento Corporation, Inc.'s Complaint for annulment
of real estate mortgage.

Rule 45 of the Rules of Court allows for a direct recourse to this Court by appeal from a
judgment, final order, or resolution of the Regional Trial Court. Rule 45, Section 1
provides:
Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.
Rule 41, Section 2(c) likewise provides:
Section 2. Modes of appeal. —

....

(c) Appeal by certiorari. — In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari
in accordance with Rule 45.

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Thus, there is no question that a petitioner may file a verified petition for review
directly with this Court if only questions of law are at issue; however, if both questions
of law and of facts are present, the correct remedy is to file a petition for review with
the Court of Appeals.54

Doña Adela Export International v. Trade and Investment Development

Corp.55 differentiated between a question of law and a question of fact as follows:
We stress that a direct recourse to this Court from the decisions, final resolutions and
orders of the RTC may be taken where only questions of law are raised or involved.
There is a question of law when the doubt or difference arises as to what the law is on a
certain state of facts, which does not call for an examination of the probative value of
the evidence presented by the parties-litigants. On the other hand, there is a question
of fact when the doubt or controversy arises as to the truth or falsity of the alleged
facts. Simply put, when there is no dispute as to fact, the question of whether the
conclusion drawn therefrom is correct or not, is a question of law.56 (Citation omitted)
In the case at bar, the underlying question for this Court's resolution pertains to
jurisdiction, or to be more precise, whether the Regional Trial Court attained jurisdiction
over petitioner's Complaint with the amount of docket fees paid.

Considering that the issue of jurisdiction is a pure question of law,57 petitioner did not
err in filing its appeal directly with this Court pursuant to law and prevailing
jurisprudence.

II

Petitioner contends that its Complaint for annulment of real estate mortgage has a
subject incapable of pecuniary estimation because it was not intended to recover
ownership or possession of the mortgaged properties sold to respondent during the
auction sale.58 It insists that it had ownership and possession of the mortgaged
properties when it filed its Complaint; hence, it never expressly or impliedly sought
recovery of their ownership or possession.59

The petition is meritorious.

Jurisdiction is "the power and authority of a court to hear, try and decide a
case"60 brought before it for resolution.

Courts exercise the powers conferred on them with binding effect if they acquire
jurisdiction over: "(a) the cause of action or the subject matter of the case; (b) the
thing or the res; (c) the parties; and (d) the remedy."61

Jurisdiction over the thing or the res is a court's authority over the object subject of
litigation.62 The court obtains jurisdiction or actual custody over the object through the
seizure of the object under legal process or the institution of legal proceedings which
recognize the power and authority of the court.63

Jurisdiction over the parties is the court's power to render judgment that are binding on
the parties. The courts acquire jurisdiction over the plaintiffs when they file their
initiatory pleading, while the defendants come under the court's jurisdiction upon the
valid service of summons or their voluntary appearance in court.64

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Jurisdiction over the cause of action or subject matter of the case is the court's
authority to hear and determine cases within a general class where the proceedings in
question belong. This power is conferred by law and cannot be acquired through
stipulation, agreement between the parties,65 or implied waiver due to the silence of a
party.66

Jurisdiction is conferred by the Constitution, with Congress given the plenary power, for
cases not enumerated in Article VIII, Section 567 of the Constitution, to define,
prescribe, and apportion the jurisdiction of various courts.68

Batas Pambansa Blg. 129, or the Judiciary Reorganization Act of 1980 as amended by
Republic Act No. 7691, provided for the jurisdictional division between the first and
second level courts by considering the complexity of the cases and the experience
needed of the judges assigned to hear the cases.

In criminal cases, first level courts are granted exclusive original jurisdiction to hear
complaints on violations of city or municipal ordinances69 and offenses punishable with
imprisonment not exceeding six (6) years.70 In contrast, second level courts, with more
experienced judges sitting at the helm, are granted exclusive original jurisdiction to
preside over all other criminal cases not within the exclusive jurisdiction of any other
court, tribunal, or body.71

The same holds true for civil actions and probate proceedings, where first level courts
have the power to hear cases where the value of personal property, estate, or amount
of the demand does not exceed P100,000.00 or P200,000.00 if in Metro Manila.72 First
level courts also possess the authority to hear civil actions involving title to, possession
of, or any interest in real property where the value does not exceed P20,000.00 or
P50,000.00 if the real property is situated in Metro Manila.73 Second level courts then
assume jurisdiction when the values involved exceed the threshold amounts reserved
for first level courts74 or when the subject of litigation is incapable of pecuniary
estimation.75

First level courts were also conferred with the power to hear the relatively
uncomplicated cases of forcible entry and unlawful detainer,76 while second level courts
are authorized to hear all actions in admiralty and maritime jurisdiction77 with claims
above a certain threshold amount. Second level courts are likewise authorized to hear
all cases involving the contract of marriage and marital relations,78 in recognition of the
expertise and probity required in deciding issues which traverse the marital sphere.

Section 19(1) of Batas Pambansa Blg. 129, as amended, provides Regional Trial Courts
with exclusive, original jurisdiction over "all civil actions in which the subject of the
litigation is incapable of pecuniary estimation."

Lapitan v. Scandia79 instructed that to determine whether the subject matter of an

action is incapable of pecuniary estimation, the nature of the principal action or remedy
sought must first be established. This finds support in this Court's repeated
pronouncement that jurisdiction over the subject matter is determined by examining
the material allegations of the complaint and the relief sought.80Heirs of Dela Cruz v.
Heirs of Cruz81 stated, thus:

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It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or
government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed
for, irrespective of whether the petitioner or complainant is entitled to any or all such
reliefs.82
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
A review of the jurisprudence of this Court indicates that in determining whether an
action is one the subject matter of which is not capable of pecuniary estimation, this
Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of
money, or where the money claim is purely incidental to, or a consequence of, the
principal relief sought like in suits to have the defendant perform his part of the
contract (specific performance) and in actions for support, or for annulment of a
judgment or to foreclose a mortgage, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance. The rationale of the rule is plainly that
the second class cases, besides the determination of damages, demand an inquiry into
other factors which the law has deemed to be more within the competence of courts of
first instance, which were the lowest courts of record at the time that the first organic
laws of the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine
Commission of June 11, 1901).83 (Citation omitted)
Heirs of Sebe v. Heirs of Sevilla84 likewise stressed that if the primary cause of action is
based on a claim of ownership or a claim of legal right to control, possess, dispose, or
enjoy such property, the action is a real action involving title to real property.85

A careful reading of petitioner's Complaint convinces this Court that petitioner never
prayed for the reconveyance of the properties foreclosed during the auction sale, or
that it ever asserted its ownership or possession over them. Rather, it assailed the
validity of the loan contract with real estate mortgage that it entered into with
respondent because it supposedly never received the proceeds of the P100,000,000.00
loan agreement.86 This is evident in its Complaint, which read:
GROUNDS FOR THE APPLICATION OF PRELIMINARY INJUNCTION AND TEMPORARY
RESTRAINING ORDER

7. Defendant PBCOM knows fully well that plaintiff did not receive from it the loan it
(PBCOM) alleged to have granted in its favor.

8. Despite this, defendant PBCOM has filed with the Ex-Officio Sheriff of Bulacan, a
petition for extra judicial foreclosure of real estate mortgage, bent on foreclosing the
real estate properties of plaintiff, photocopy of the petition is hereto attached as Annex
"F".

9. The auction sale of the properties is set on December 29, 2011.

10. Defendant PBCOM, well knowing the facts narrated above and willfully disregarding
the property rights of plaintiff, wrongfully filed an extra judicial foreclosure of real

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estate mortgage and pursuant to said petition, the Ex-Officio Sheriff now does offer for
sale, the real estate properties of the plaintiff as set forth in its (PBCOM) said petition.

11. Unless defendants PBCOM and Ex-Officio Sheriff are restrained by this Honorable
Court, they will infringe the property rights of the plaintiff in the manner herein before
related.87
Far East Bank and Trust Company v. Shemberg Marketing Corporation88 stated that an
action for cancellation of mortgage has a subject that is incapable of pecuniary
estimation:
Here, the primary reliefs prayed for by respondents in Civil Case No. MAN-4045 is the
cancellation of the real estate and chattel mortgages for want of consideration.
In Bumayog v. Tumas, this Court ruled that where the issue involves the validity of a
mortgage, the action is one incapable of pecuniary estimation. In the more recent case
of Russell v. Vestil, this Court, citing Bumayog, held that an action questioning the
validity of a mortgage is one incapable of pecuniary estimation. Petitioner has not
shown adequate reasons for this Court to revisit Bumayog and Russell. Hence,
petitioner's contention [cannot] be sustained. Since respondents paid the docket fees,
as computed by the clerk of court, consequently, the trial court acquired jurisdiction
over Civil Case No. MAN-4045.89
It is not disputed that even if the Complaint were filed a few days after the mortgaged
properties were foreclosed and sold at auction to respondent as the highest bidder, the
certificate of sale was only issued to respondent after the Complaint was filed.

Section 6 of Act No. 3135,90 as amended, provides that a property sold through an
extrajudicial sale may be redeemed "at any time within the term of one year from and
after the date of the sale":
Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act.
Mahinay v. Dura Tire & Rubber Industries Inc.91 clarified that "[t]he date of the sale'
referred to in Section 6 is the date the certificate of sale is registered with the Register
of Deeds. This is because the sale of registered land does not 'take effect as a
conveyance, or bind the land' until it is registered."92

The registration of the certificate of sale issued by the sheriff after an extrajudicial sale
is a mandatory requirement; thus, if the certificate of sale is not registered with the
Registry of Deeds, the property sold at auction is not conveyed to the new owner and
the period of redemption does not begin to run.93

In the case at bar, the Ex-Officio Sheriff of the City of Malolos, Bulacan was restrained
from registering the certificate of sale with the Registry of Deeds of Bulacan and the
certificate of sale was only issued to respondent after the Complaint for annulment of
real estate mortgage was filed. Therefore, even if the properties had already been
foreclosed when the Complaint was filed, their ownership and possession remained with

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petitioner since the certificate of sale was not registered with the Registry of Deeds.
This supports petitioner's claim that it never asked for the reconveyance of or asserted
its ownership over the mortgaged properties when it filed its Complaint since it still
enjoyed ownership and possession over them.

Considering that petitioner paid the docket fees as computed by the clerk of court, upon
the direction of the Executive Judge, this Court is convinced that the Regional Trial
Court acquired jurisdiction over the Complaint for annulment of real estate mortgage.

Furthermore, even if it is assumed that the instant case were a real action and the
correct docket fees were not paid by petitioner, the case should not have been
dismissed; instead, the payment of additional docket fees should have been made a
lien on the judgment award. The records attest that in filing its complaint, petitioner
readily paid the docket fees assessed by the clerk of court; hence, there was no
evidence of bad faith or intention to defraud the government that would have rightfully
merited the dismissal of the Complaint.94

III

Although not raised in the Petition, this Court nonetheless deems it proper to pass upon
the legality of the Regional Trial Court January 4, 2012 Order, which directed the
parties to observe the status quo ante,95 effectively extending indefinitely its 72-hour
ex-parte temporary restraining order issued on January 2, 2012.96

Rule 58, Section 5 of the Rules of Court provides the instances when a temporary
restraining order may be issued:
Section 5. Preliminary injunction not granted without notice; exception. — No
preliminary injunction shall be granted without hearing and prior notice to the party or
person sought to be enjoined. If it shall appear from facts shown by affidavits or by the
verified application that great or irreparable injury would result to the applicant before
the matter can be heard on notice, the court to which the application for preliminary
injunction was made, may issue a temporary restraining order to be effective only for a
period of twenty (20) days from service on the party or person sought to be enjoined,
except as herein provided. Within the said twenty-day period, the court must order said
party or person to show cause, at a specified time and place, why the injunction should
not be granted, determine within the same period whether or not the preliminary
injunction shall be granted, and accordingly issue the corresponding order.

However, and subject to the provisions of the preceding sections, if the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable injury, the
executive judge of a multiple-sala court or the presiding judge of a single-sala court
may issue ex-parte a temporary restraining order effective for only seventy-two (72)
hours from issuance but he shall immediately comply with the provisions of the next
preceding section as to service of summons and the documents to be served therewith.
Thereafter, within the aforesaid seventy-two (72) hours, the judge before whom the
case is pending shall conduct a summary hearing to determine whether the temporary
restraining order shall be extended until the application for preliminary injunction can
be heard. In no case shall the total period of effectivity of the temporary restraining
order exceed twenty (20) days, including the original seventy-two hours provided
herein.

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In the event that the application for preliminary injunction is denied or not resolved
within the said period, the temporary restraining order is deemed automatically
vacated. The effectivity of a temporary restraining order is not extendible without need
of any judicial declaration to that effect and no court shall have authority to extend or
renew the same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary

restraining order shall be effective for sixty (60) days from service on the party or
person sought to be enjoined. A restraining order issued by the Supreme Court or a
member thereof shall be effective until further orders.
It is clear that a temporary restraining order may be issued by a trial court in only two
(2) instances: first, when great or irreparable injury would result to the applicant even
before the application for writ of preliminary injunction can be heard; and second, if the
matter is of extreme urgency and the applicant will suffer grave injustice and
irreparable injury. The executive judge of a multi-sala court or the presiding judge of a
single-sala court may issue a 72-hour temporary restraining order.

In both instances, the temporary restraining order may be issued ex parte. However, in
the first instance, the temporary restraining order has an effectivity of only 20 days to
be counted from service to the party sought to be enjoined. Likewise, within those 20
days, the court shall order the enjoined party to show why the injunction should not be
granted and shall then determine whether or not the injunction should be granted.

In the second instance, when there is extreme urgency and the applicant will suffer
grave injustice and irreparable injury, the court shall issue a temporary restraining
order effective for only 72 hours upon issuance. Within those 72 hours, the court shall
conduct a summary hearing to determine if the temporary restraining order shall be
extended until the application for writ of preliminary injunction can be heard. However,
in no case shall the extension exceed 20 days.

If the application for preliminary injunction is denied or not resolved within the given
periods, the temporary restraining order is automatically vacated and the court has no
authority to extend or renew it on the same ground of its original issuance.

Despite the clear wording of the rules, the Regional Trial Court issued a status quo ante
order dated January 4, 2012, indefinitely extending the temporary restraining order on
the registration of the certificate of sale with the Registry of Deeds.

Petitioner applied for a writ of preliminary injunction, yet the Regional Trial Court did
not conduct any hearing for that purpose and merely directed the parties to observe the
status quo ante.

Miriam College Foundation, Inc v. Court of Appeals 97 explained the difference between
preliminary injunction and a restraining order as follows:
Preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or a person to
perform to refrain from performing a particular act or acts. As an extraordinary remedy,
injunction is calculated to preserve or maintain the status quo of things and is generally
availed of to prevent actual or threatened acts, until the merits of the case can be

169 | P a g e
heard. A preliminary injunction persists until it is dissolved or until the termination of
the action without the court issuing a final injunction.

The basic purpose of restraining order, on the other hand, is to preserve the status quo
until the hearing of the application for preliminary injunction. Under the former A§5,
Rule 58 of the Rules of Court, as amended by A§5, Batas Pambansa Blg. 224, a judge
(or justice) may issue a temporary restraining order with a limited life of twenty days
from date of issue. If before the expiration of the 20-day period the application for
preliminary injunction is denied, the temporary order would thereby be deemed
automatically vacated. If no action is taken by the judge on the application for
preliminary injunction within the said 20 days, the temporary restraining order would
automatically expire on the 20th day by the sheer force of law, no judicial declaration to
that effect being necessary. In the instant case, no such preliminary injunction was
issued; hence, the TRO earlier issued automatically expired under the aforesaid
provision of the Rules of Court.98 (Citations omitted)
A temporary restraining order cannot be extended indefinitely to take the place of a
writ of preliminary injunction, since a temporary restraining order is intended only to
have a limited lifespan and is deemed automatically vacated upon the expiration of 72
hours or 20 days, as the case may be. As such, the temporary restraining order has
long expired and, in the absence of a preliminary injunction, there was nothing to stop
the sheriff from registering the certificate of sale with the Registry of Deeds.

This Court has repeatedly expounded on the nature of a temporary restraining

order99 and a preliminary injunction.100 Yet lower courts consistently interchange these
ancillary remedies and disregard the sunset clause101 inherent in a temporary
restraining order by erroneously extending it indefinitely. Such ignorance or defiance of
basic remedial measures is a gross disservice to the public, who look towards the court
for legal guidance and legal remedy. More importantly, this cavalier attitude towards
these injunctive reliefs might even be construed as a deliberate effort to look the other
way to favor a party, which will then sully the image of the entire judiciary. Henceforth,
this Court will demand stricter compliance with the rules from the members of the
bench as regards their issuances of these injunctive reliefs.

IV

Finally, there is a need to reassess the place of Home Guaranty v. R-II Builders102 in our
jurisprudence.

In Home Guaranty, R-II Builders, Inc. (R-II Builders) filed a Complaint for the rescission
of the Deed of Assignment and Conveyance it entered into with Home Guaranty
Corporation and National Housing Authority. The Complaint was initially determined to
have a subject that is incapable of pecuniary estimation and the docket fees were
assessed and paid accordingly.103

R-II Builders later filed a motion to admit its Amended and Supplemental Complaint,
which deleted its earlier prayer for the resolution of its Deed of Assignment and
Conveyance, and prayed for the conveyance of title to and/or possession of the entire
Asset Pool. The Regional Trial Court ruled that the Amended and Supplemental
Complaint involved a real action and directed R-II Builders to pay the correct docket
fees.104

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Instead of paying the additional docket fees, R-II Builders withdrew its Amended and
Supplemental Complaint and instead filed a motion to admit its Second Amended
Complaint, which revived the prayer in its original Complaint to resolve the Deed of
Assignment and Conveyance and deleted the causes of action for conveyance of title to
and/or possession of the entire Asset Pool in its Amended and Supplemental
Complaint.105 The Regional Trial Court granted the motion to admit the Second
Amended Complaint, ratiocinating that the docket fees to the original Complaint had
been paid; that the Second Amended Complaint was not intended to delay the
proceedings; and that the Second Amended Complaint was consistent with R-II
Builders' previous pleadings.106

The Court of Appeals upheld the ruling of the Regional Trial Court and reiterated that
the case involved a subject that was incapable of pecuniary
estimation.107 However, Home Guaranty reversed the Court of Appeals Decision, ruling
that the Complaint and the Amended and Supplemental Complaint both involved
prayers for the conveyance and/or transfer of possession of the Asset Pool, causes of
action which were undoubtedly real actions. Thus, the correct docket fees had not yet
been paid:108
Although an action for resolution and/or the nullification of a contract, like an action for
specific performance, fall squarely into the category of actions where the subject matter
is considered incapable of pecuniary estimation, we find that the causes of action for
resolution and/or nullification of the [Deed of Assignment and Conveyance] was
erroneously isolated by the [Court of Appeals] from the other causes of action alleged
in R-II Builders' original complaint and Amended and Supplemental Complaint which
prayed for the conveyance and/or transfer of possession of the Asset Pool. In Gochan v.
Gochan, this Court held that an action for specific performance would still be considered
a real action where it seeks the conveyance or transfer of real property, or ultimately,
the execution of deeds of conveyance of real property.

....

Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the original
complaint and Amended and Supplemental Complaint both presuppose a real action for
which appropriate docket fees computed on the basis of the assessed or estimated
value of said properties should have been assessed and paid. . . .109 (Citations omitted)
Home Guaranty stated that to determine whether an action is capable or incapable of
pecuniary estimation, the nature of the principal action or remedy prayed for must first
be determined.110 Nonetheless, in citing Ruby Shelter Builders v. Formaran, Home
Guaranty looked beyond R-II Builder's principal action for annulment or rescission of
contract to purportedly unmask its true objective and nature of its action, which was to
recover real property.111

In a dissenting opinion in the Home Guaranty112 June 22, 2011 Resolution that

dismissed R-II Builders' motion for reconsideration, Associate Justice Presbitero
Velasco, Jr. stressed that one must first look at the principal action of the case to
determine if it is capable or incapable of pecuniary estimation:

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Whether or not the case is a real action, and whether or not the proper docket fees
were paid, one must look to the main cause of action of the case. In all instances, in
the original Complaint, the Amended and Supplemental Complaint and the Amended
Complaint, it was all for the resolution or rescission of the [Deed of Assignment and
Conveyance], with the prayer for the provisional remedy of injunction and the
appointment of a trustee and subsequently a receiver. In the Second Amended
Complaint, the return of the remaining assets of the asset pool, if any, to respondent R-
II Builders would only be the result of the resolution or rescission of the [Deed of
Assignment and Conveyance].

Even if real property in the Asset Pool may change hands as a result of the case in the
trial court, the fact alone that real property is involved does not make that property the
basis of computing the docket fees. De Leon v. Court of Appeals has already settled the
matter. That case, citing Bautista v, Lim, held that a case for rescission or annulment of
contract is not susceptible of pecuniary estimation. On the other hand, in the Decision
We rendered on July 25, 2005 in Serrano v. Delica, We ruled that the action for
cancellation of contracts of sale and the titles is a real action. Similarly, on February 10,
2009, We ruled in Ruby Shelter Builders and Realty Development Corporation v.
Formaran III (Ruby Shelter) that an action for nullification of a Memorandum of
Agreement which required the lot owner to issue deeds of sale and cancellation of the.
Deeds of Sale is a real action.113 (Citations omitted)
Whatever confusion there might have been regarding the nature of actions for nullity of
contracts or legality of conveyances, which would also involve recovery of sum of
money or real property, was directly addressed by Lu v. Lu Ym.114Lu underscored that
"where the basic issue is something other than the right to recover a sum of money,
the money claim being only incidental to or merely a consequence of, the principal relief
sought, the action is incapable of pecuniary estimation."115

This finds support in numerous decisions where this Court proclaimed that the test to
determine whether an action is capable or incapable of pecuniary estimation is to
ascertain the nature of the principal action or relief sought. Thus, if the principal relief
sought is the recovery of a sum of money or real property, then the action is capable of
pecuniary estimation. However, if the principal relief sought is not for the recovery of
money or real property and the money claim is only a consequence of the principal
relief, then the action is incapable of pecuniary estimation.116

Considering that the principal remedy sought by R-II Builders was the resolution of the
Deed of Assignment and Conveyance, the action was incapable of pecuniary estimation
and Home Guaranty erred in treating it as a real action simply because the principal
action was accompanied by a prayer for conveyance of real property.

It is clear that subject matter jurisdiction cannot be dependent on the supposed

ultimate motive or true objective of the complaint because this will require the judge to
speculate on the defenses of the plaintiff beyond the material allegations contained in
the complaint. Likewise, in attempting to pinpoint the true objective of the complaint at
the initial stages of trial, the judge might end up dictating the result outside of the
evidence still to be presented during the trial, opening up the judge to charges of
partiality and even impropriety. Furthermore, the judge is not aware of the evidence to
be presented by either party when the complaint is filed; thus, there is no reliable basis
that can be used to infer the true objective of the complaint. It is imperative then that

172 | P a g e
the competing claims as basis of subject matter jurisdiction be textually based, finding
its basis in the body of the complaint and the relief sought without reference to
extraneous facts not alleged or evidence still to be presented.

Nonetheless, if subject matter jurisdiction is assailed during the course of the trial and
evidence is presented to prove the defense's allegation of lack of jurisdiction, this will
lead to an anomaly where the defense's evidence, instead of the complaint, will
effectively determine the remedy and cause of action.

In the case at bar, petitioner contends that its complaint prayed for the annulment of
the real estate mortgage it entered into with respondent and not for the recovery or
reconveyance of the mortgaged properties because it was still the registered owner
when it filed its complaint. The evidence on record supports petitioner's claim; hence,
there was no reason for the dismissal of its Complaint for lack of jurisdiction.

Home Guaranty likewise erred in dismissing the action because of non-payment of the

correct filing fees. Fedman Development Corporation v. Agcaoili117 reiterated that where
the assessed docket fees have been paid and the assessment turns out to be
insufficient, the court still acquires jurisdiction over the case, subject to payment of the
deficiency assessment.118 The only exception is when the deficiency in docket fees is
accompanied with bad faith and an intention to defraud the government.119 It is not
disputed that R-II Builders paid the assessed docket fees when it filed its Complaint,
negating bad faith or intent on its part to defraud the government.

In light of the foregoing, this Court reaffirms that the nature of an action is determined
by the principal relief sought in the complaint, irrespective of the other causes of
actions that may also crop up as a consequence of the principal relief prayed for. The
contrary rule espoused in Home Guaranty is thereby set aside.

WHEREFORE, this Court resolves to GRANT the Petition. The assailed April 3, 2012
Decision and July 25, 2012 Order of Branch 11, Regional Trial Court, City of Malolos,
Bulacan in Civil Case No. 04-M-2012 are REVERSED and SET ASIDE.

The case is ordered REMANDED to Branch 11, Regional Trial Court, City of Malolos,
Bulacan for continued trial on First Sarmiento Property Holdings, Inc.'s Complaint for
annulment of real estate mortgage and its amendments.

SO ORDERED.

173 | P a g e
 FIRST DIVISION

[G.R. NO. 177486 : December 21, 2009]

PURISIMO BUYCO, Petitioner, v. NELSON
BARAQUIA, Respondent.

DECISION

CARPIO MORALES, J.:

Nelson Baraquia (respondent) filed before the Regional Trial Court

(RTC) of Iloilo City a complaint1 against Dominico Buyco and
Clemente Buyco (Buycos), for the establishment of a permanent
right of way, injunction and damages with preliminary injunction
and temporary restraining order, to enjoin the Buycos from closing
off a private road within their property which he has been using to
go to and from the public highway to access his poultry farm.

The Buycos died during the pendency of the case, and were
substituted by Purisimo Buyco (petitioner) and his brother Gonzalo.

Branch 39 of the Iloilo RTC granted respondent's application for

preliminary injunction.

By Decision2 of February 14, 2007, the trial court dismissed

respondent's complaint for failure to establish the concurrence of
the essential requisites for the establishment of an easement of
right of way under Articles 649 and 650 of the Civil Code.3 It
accordingly lifted the writ of preliminary injunction.

Respondent filed a notice of appeal of the trial court's decision.

Petitioner filed too a notice of partial appeal bearing on to the non-
award of prayer for damages.

Respondent later filed with the trial court a motion to cite petitioner
and his brother Gonzalo in contempt, alleging that they had closed
off the subject road, thus violating the writ of preliminary injunction.
The trial court, by Resolution of March 13, 2007,4 noting that
respondent received on March 5, 2007 his copy of its decision while
174 | P a g e
petitioner received his on February 21, 2007, held that the February
14, 2007 decision had not yet become final and executory, hence,
the writ of preliminary injunction remained to be valid, efficacious
and obligatory, rendering petitioner's act of closing the road on
March 1, 2007 an indirect contempt of court. It thus declared
petitioner and his brother in contempt of court.

Petitioner moved for reconsideration of the trial court's March 13,

2007 Resolution, contending that a preliminary injunction, once
quashed, ceases to exist, and that he and his brother cannot be
held guilty of indirect contempt by mere motion.

By Resolution5 of April 18, 2007, the trial court set aside the March

13, 2007 Resolution and granted petitioner's motion for
reconsideration, ruling that petitioner and his brother cannot be
held in contempt of court by mere motion and not by verified
petition.

On the lifetime of the writ of preliminary injunction, the trial court

held that it is its "illumined opinion that the matter of whether a writ
of preliminary injunction remains valid until the decision annulling
the same attains finality is not firmly entrenched in
jurisprudence, contrary to the position of the defendants." It
thereupon quoted a portion of the ruling in the 2006 case of Lee v.
Court of Appeals,6 to wit:

Furthermore, notwithstanding the stand of both parties, the fact

remains that the Decision of the Court of Appeals annulling the
grant of preliminary injunction in favor of petitioners has not yet
become final on 14 December 2000. In fact, such Decision has not
yet become final and executory even on the very date of this
Decision, in view of petitioners' appeal with us under Rule 45 of the
1997 Rules of Civil Procedure. The preliminary injunction, therefore,
issued by the trial court remains valid until the Decision of the Court
of Appeals annulling the same attains finality, and violation thereof
constitutes indirect contempt which, however, requires either a
formal charge or a verified petition.7 (underscoring in the original
decision)

175 | P a g e
Hence, this Petition for Review, raising a question of law - whether
the lifting of a writ of preliminary injunction due to the dismissal of
the complaint is immediately executory, even if the dismissal of the
complaint is pending appeal.

The petition is meritorious.

A writ of preliminary injunction is an order granted at any stage of

an action or proceeding prior to the judgment or final order,
requiring a party or a court, agency or a person to refrain from a
particular act or acts.8 It is merely a provisional remedy, adjunct to
the main case subject to the latter's outcome.9 It is not a cause of
action in itself.10 Being an ancillary or auxiliary remedy, it is
available during the pendency of the action which may be resorted
to by a litigant to preserve and protect certain rights and interests
therein pending rendition, and for purposes of the ultimate effects,
of a final judgment in the case.

The writ is provisional because it constitutes a temporary measure

availed of during the pendency of the action and it is ancillary
because it is a mere incident in and is dependent upon the result of
the main action.11

It is well-settled that the sole object of a preliminary injunction,

whether prohibitory or mandatory, is to preserve the status
quo until the merits of the case can be heard. It is usually granted
when it is made to appear that there is a substantial controversy
between the parties and one of them is committing an act or
threatening the immediate commission of an act that will cause
irreparable injury or destroy the status quo of the controversy
before a full hearing can be had on the merits of the case.12

Indubitably, in the case at bar, the writ of preliminary injunction

was granted by the lower court upon respondent's showing that he
and his poultry business would be injured by the closure of the
subject road. After trial, however, the lower court found that
respondent was not entitled to the easement of right of way prayed
for, having failed to prove the essential requisites for such
entitlement, hence, the writ was lifted.ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

176 | P a g e
The present case having been heard and found dismissible as it was
in fact dismissed, the writ of preliminary injunction is deemed lifted,
its purpose as a provisional remedy having been served, the appeal
therefrom notwithstanding.

Unionbank v. Court of Appeals13 enlightens:

"x x x a dismissal, discontinuance or non-suit of an action in which a

restraining order or temporary injunction has been granted operates
as a dissolution of the restraining order or temporary injunction,"
regardless of whether the period for filing a motion for
reconsideration of the order dismissing the case or appeal therefrom
has expired. The rationale therefor is that even in cases where an
appeal is taken from a judgment dismissing an action on the
merits, the appeal does not suspend the judgment, hence the
general rule applies that a temporary injunction terminates
automatically on the dismissal of the action." (italics, emphasis and
underscoring supplied)

The lower court's citation of Lee v. Court of Appeals14 is misplaced.

In Lee, unlike in the present case, the original complaint for specific
performance and cancellation of real estate mortgage was not yet
decided on the merits by the lower court. Thus, the preliminary
injunction therein issued subsisted pending appeal of an incident.

There being no indication that the appellate court issued an

injunction in respondent's favor, the writ of preliminary injunction
issued on December 1, 1999 by the trial court was automatically
dissolved upon the dismissal of Civil Case No. 26015.

WHEREFORE, the petition is GRANTED. The Resolution dated April

18, 2007 of the trial court is REVERSED. The writ of preliminary
injunction which Branch 39 of the Iloilo Regional Trial Court issued
on December 1, 1999 was automatically dissolved upon its dismissal
by Decision of February 14, 2007 of Civil Case No. 26015.

SO ORDERED.

177 | P a g e
EN BANC

[ GR No. 225973, Aug 08, 2017 ]

SATURNINO C. OCAMPO v. REAR ADMIRAL ERNESTO C. ENRIQUEZ +

RESOLUTION

PERALTA, J.:
On November 8, 2016, the Court dismissed the petitions challenging the
intended burial of the mortal remains of Ferdinand E.
Marcos (Marcos), former President of the Republic of the Philippines, at
the Libingan ng mga Bayani (LNMB). As the Filipino public witnessed
through the broadcast media and as the Office of the Solicitor
General (OSG) manifested[1] based on the letter sent by the Philippine
Veterans Affairs Office (PVAO) of the Department of National
Defense (DND), Marcos was finally laid to rest at the LNMB around
noontime of November 18, 2016, which was ten (10) days after the
promulgation of the judgment and prior to the filing of petitioners' separate
motions for reconsideration.

Now before Us are the following matters for resolution:

1. Motions for reconsideration (MRs) filed by Ocampo et al.,

[2]
 Lagman et al.,[3] Rosales et al.,[4] Latiph,[5] and De Lima;[6]

2. Urgent motion or petition for the exhumation of Marcos' remains at

the LNMB filed by Lagman et al.;[7] and

3. Petitions to cite respondents in contempt of court filed by Ocampo et

al.[8] and Rosales et al.,[9] which were consolidated[10] with the case
and docketed as G.R. No. 228186 and G.R. No. 228245, respectively.

Respondents were ordered to file their Comment to the above-mentioned

178 | P a g e
pleadings, as to which they complied in due time.

We shall first tackle the procedural issues raised.

Political question doctrine

Petitioners argue that the main issue of the petitions does not deal on the
wisdom of the actions of President Rodrigo R. Duterte (Duterte) and the
public respondents but their violation of the 1987
Constitution (Constitution), laws, and jurisprudence. They posit that,
under its expanded jurisdiction, the Court has the duty to exercise judicial
power to review even those decisions or exercises of discretion that were
formerly considered political questions in order to determine whether there
is grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of a public officer.

From the records of the proceedings of the 1986 Constitutional

Commission, it is clear that judicial power is not only a power but also a
duty which cannot be abdicated by the mere invocation of the political
question doctrine.[11] Nonetheless, Chief Justice Roberto Concepcion
clarified that Section 1, Article VIII of the Constitution was not intended to
do away with "truly political questions," which are beyond judicial review
due to the doctrine of separation of powers.[12] In Francisco, Jr. v. The
House of Representatives,[13] this Court conceded that Section 1 Article VIII
does not define what are "truly political questions" and "those which are
not truly political," and that identification of these two species may be
problematic since there has been no clear standard. In the end, however,
We resolved that, "[i]n our jurisdiction, the determination of whether an
issue involves a truly political and non-justiciable question lies in the
answer to the question of whether there are constitutionally imposed limits
on powers or functions conferred upon political bodies. If there are, then
our courts are duty-bound to examine whether the branch or
instrumentality of the government properly acted within such limits."[14]

The Court sees no cogent reason to depart from the standard set
in Francisco, Jr. Applying that in this case, We hold that petitioners failed
to demonstrate that the constitutional provisions they invoked delimit the
executive power conferred upon President Duterte. Significantly, AFP
Regulations G 161-375 was issued by order of the DND Secretary, who, as
the alter ego of the President, has supervision and control over the Armed

179 | P a g e
Forces of the Philippines (AFP) and the PVAO. The Veterans Memorial
Historical Division of the PVAO is tasked to administer, develop and
maintain military shrines such as the LNMB, As held in Our Decision, AFP
Regulations G 161-375 is presumptively valid and has the force and effect of
a law and that, until set aside by the Court, is binding upon executive and
administrative agencies like public respondents, including the President as
the chief executor of the laws.

While the Bill of Rights stands primarily as a limitation not only against
legislative encroachments on individual liberties but also against
presidential intrusions,[15] petitioners failed to show as well that President
Duterte violated the due process and equal protection clauses in issuing a
verbal order to public respondents that authorized Marcos' burial at the
LNMB. To note, if the grant of presidential pardon to one who is totally
undeserving cannot be set aside under the political question doctrine, [16] the
same holds true with respect to the President's power to faithfully execute a
valid and existing AFP regulation governing the LNMB as a national
military cemetery and military shrine.

More so, even if subject to review by the Court, President Duterte did not
gravely abuse his discretion when he allowed Marcos' burial at the LNMB
because it was already shown that the latter is qualified as a Medal of Valor
Awardee, a war veteran, and a retired military personnel, and not
disqualified due to dishonorable separation/revertion/discharge from
service or conviction by final judgment of an offense involving moral
turpitude. If grave abuse is not established, the Court will not substitute its
judgment for that of the official concerned and decide a matter which by its
nature or by law is for the latter alone to decide.[17]

Locus standi

Petitioners claim to have a legal standing to file the petitions because they
have already sustained direct injury as a result of the act being questioned
in this case. With respect to petitioners who are human rights violation
victims (HRVVs) during the martial law period, they contend that their
right to dispute Marcos' burial at the LNMB rests on their right to full and
effective remedy and entitlement to reparation as guaranteed by the State
under the Constitution as well as the domestic and international laws. In
particular, they cite Republic Act (R.A.) No. 10368, arguing that Marcos'
burial at the LNMB distorts the historical bases upon which their rights to

180 | P a g e
other non-monetary compensation were granted, and is an affront to their
honor and dignity that was restored to them by law. Essentially, petitioners
decry that Marcos' burial at the LNMB results in illegal use of public funds,
re-traumatization, historical revisionism, disregard of their state
recognition as heroes and their rights to effective reparation and to
satisfaction.

Petitioners' contentions still fail to persuade.

Locus standi or legal standing has been defined as a personal and

substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged.[18] Generally, a party will be allowed to litigate only when he or
she can demonstrate that (1) he or she has personally suffered some actual
or threatened injury because of the allegedly illegal conduct of the
government; (2) the injury is fairly traceable to the challenged action; and
(3) the injury is likely to be redressed by the remedy being sought.
[19]
 Petitioners have not clearly shown the direct injury they suffered or
would suffer on account of the assailed memorandum and directive
allowing Marcos' burial at the LNMB.

Petitioners' view that they sustained or will sustain direct injury is founded
on the wrong premise that Marcos' burial at the LNMB contravenes the
provisions of the Constitution: P.D. No. 105; R.A. Nos. 289, 10066, 10086,
10368; and international laws. However, as the Court fully explained in the
assailed Decision, the historical and legal bases governing the LNMB
unequivocally reveal its nature and purpose as an active military
cemetery/grave site over which President Duterte has certain discretionary
authority, pursuant to his control and commander-in-chief powers, which
is beyond the Court's judicial power to review.

Petitioners cannot also maintain that Marcos' burial at the LNMB serves no
legitimate public purpose and that no valid emulative recognition should be
given him in view of his sins as recognized by law and jurisprudence. They
have not proven that Marcos was actually not qualified and in fact
disqualified under the provisions of AFP Regulations G 161-375. Moreover,
the beneficial pro visions of R.A. No. 10368 cannot be extended to construe
Marcos' burial at the LNMB as a form of reparation for the HRVVs. As We
pointed out, such unwarranted interpretation is tantamount to judicial
legislation, hence, unconstitutional. It is not Marcos' burial at the LNMB

181 | P a g e
that would result in the "re-traumatization" of HRVVs but the act of
requiring them to recount their harrowing experiences in the course of legal
proceedings instituted by them or their families to seek justice and
reparation for the gross human rights violations.

While the Court has adopted a liberal attitude and recognized the legal
standing of concerned citizens who have invoked a public right allegedly
breached by a governmental act, there must be showing that the issues
raised are of transcendental importance which must be settled early.
[20]
 Since the term has no exact definition, the Court has provided the
following instructive guides to determine whether a matter is of
transcendental importance: (1) the character of the funds or other assets
involved in the case; (2) the presence of a clear case of disregard of
constitutional or statutory prohibition by the public respondent agency or
instrumentality of the government; and (3) the lack of any other party with
a more direct and specific interest in the questions being raised. [21] As held
in the assailed Decision and further elucidated below, petitioners are
unable to satisfy all three determinants.

At this point, suffice it to state that given the public character of the LNMB
and the general appropriations for its maintenance and upkeep, petitioners
failed to prove illegal disbursement of public funds by showing that Marcos
is disqualified to be interred at the LNMB under the provisions of existing
Constitution, laws, and regulations. Also, they did not establish that a
special disbursement was ordered for the Marcos burial apart from the
funds appropriated for the interment of those who are similarly situated,
which are sourced from the Maintenance and Other Operating Expenses of
the AFP and are regularly included in the General Appropriations Act. As
aptly noted by the OSG, the Marcos family would shoulder all the expenses
for the burial and that the AFP is even authorized to claim reimbursement
for the costs incurred therefor.

In stressing the alleged transcendental importance of the case, petitioners

made much out of the Court's issuance of Status Quo Ante
Order (SQAO), the conduct of oral arguments, and the mass protest across
various sectors of the Philippine society. They erred. The SQAO was issued
so as not to render moot and academic the petitions filed while the oral
arguments were held in order to enlighten Us on difficult and complicated
issues involved in this case. The concerted actions that transpired were but
manifestations of the people's exercise of freedom of speech and expression

182 | P a g e
or the right to peaceably assemble and petition the government for redress
of grievances. The legal requisites for judicial inquiry before a question
involving the constitutionality or validity of a law or governmental act may
be heard and decided by the Court were not at all dispense with.

Exhaustion of
Administrative Remedies
and Hierarchy of Courts

Petitioners claim that the filing of an MR before public respondents and the
Office of the President (OP) would have been an exercise in futility, and
that direct resort to this Court is justified by the following special and
compelling reasons; (1) the very alter egos of President Duterte, if not the
President himself, would rule on the MR; (2) a mere verbal instruction of
the President already put in motion the task of organizing Marcos' burial at
the LNMB; (3) the denial of an appeal to the OP is a forgone conclusion in
view of the President's repeated pronouncements during his election
campaign, after the filing of the petitions, and subsequent to the
promulgation of the Court's Decision, that he would allow Marcos' burial at
the LNMB; (4) the case involves a matter of extreme urgency which is
evident from the Court's issuance of SQAO; (5) whether the President
committed grave abuse of discretion and violated the Constitution and the
laws is purely a question of law; (6) as proven by the clandestine burial of
Marcos in coordination with public respondents, there is up other plain,
speedy and adequate remedy to assail the acts which are patently illegal and
made with grave abuse of discretion; (7) the strong public interest involved
as shown by the nationwide protests; and (8) the case is impressed with
public interest and transcendental issues.

We do not subscribe.

The purpose behind the settled rule that a motion for reconsideration is a
condition sine qua non for the filing of a petition for certiorari is to grant
the court or administrative body which issued the assailed decision,
resolution or order the opportunity to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances
of the case.[22] Even if the challenged issuance of public respondents were
rendered upon the verbal order of President Duterte, it cannot be denied
that the concerned AFP officials still have the power to enforce compliance
with the requirements of AFP Regulations G 161-375, as amended.[23] The

183 | P a g e
logical and reasonable remedy to question the burial procedures and the
allocation of plots should be with public respondents who issued the
directives.

If the court or administrative body is given an opportunity to correct itself

on an MR, there is no reason then not to extend such basic courtesy to
public respondents since they are subordinates who merely follow the
orders of their Commander-in-Chief. Like the President who is tasked to
faithfully execute the laws of the land, they are also enjoined to obey the
laws and are entitled to the disputable presumption of regularity in the
performance of their official duties. Having been charged to exercise over-
all supervision in the implementation of AFP Regulations G 161-375, public
respondents could correct the interment directive issued should there be
any meritorious ground therefor. The fact that the administrative
regulation does not provide a remedy to question an interment directive
does not automatically entitle petitioners to directly implore this Court
considering that it does not prevent them to appeal or ask for
reconsideration based on their claim of right to due process or an
opportunity to be heard on an issue over which they insist to have a
standing to intervene.

Likewise, the Court cannot anchor its judgment on news accounts of

President Duterte's statements with regard to the issue of Marcos' burial at
the LNMB. Newspaper articles amount to "hearsay evidence, twice
removed" and are therefore not only inadmissible but without any
probative value at all whether objected to or not, unless offered for a
purpose other than proving the truth of the matter asserted.[24] As it is, the
news article is admissible only as evidence that such publication exists with
the tenor of the news therein stated.[25] The same rules apply to news article
published via the broadcast media or the internet communication. While it
may be asserted that President Duterte's position on the issue is consistent,
We must base Our decision on a formal concrete act, preferably a written
order denying the MR or appeal, so as to avoid being entangled in possibly
moot and academic discourses should he make a volte-face on the issue.
Needless to state, he should be given an opportunity to correct himself, as it
is disputably presumed that he would maintain his solemn oath to faithfully
and conscientiously fulfill his duties as President of the Philippines,
preserve and defend its Constitution, execute its laws, do justice to eveiy
man, and consecrate himself to the service of the Nation. [26]

184 | P a g e
The fact that the Court was prompted to issue the SQAO does not make this
case extremely urgent to resolve. Instead of issuing a temporary restraining
order (TRO) and a writ of preliminary injunction (WPI), We issued (and
extended) the effectivity of the SQAO in order not to render moot and
academic the issues raised in the petitions. With respect to the alleged
strong public interest on the case as shown by the nationwide protests, the
Court views that such mass actions indicate the controversial nature of the
issue involved. Again, the requisites of judicial review must be satisfied.

There is also no merit in petitioners' contention that the issue of whether

President Duterte and public respondents violated the Constitution and the
laws and/or committed grave abuse of discretion is purely a question of law
that the Court ultimately has to resolve. To reiterate, the issue of allowing
Marcos' burial at the LNMB involves a truly political question which is
within the full discretionary authority and wisdom of President Duterte to
decide. There is no constitutionally imposed limits on the powers or
functions conferred upon him, much less grave abuse of discretion in the
exercise thereof. Similarly, public respondents cannot be faulted for issuing
the interment directive in their official capacities pursuant to the
President's verbal order and to a valid and binding administrative
regulation.

Petitioners' direct resort to the Court cannot also be justified by the ruling
in Drilon v. Lim[27] that –

x x x [I]n the exercise of this jurisdiction [to consider the constitutionality

of a law], lower courts are advised to act with the utmost circumspection,
bearing in mind the consequences of a declaration of unconstitutionality
upon the stability of laws, no less than on the doctrine of separation of
powers. As the questioned act is usually the handiwork of the legislative or
the executive departments, or both, it will be prudent for such courts, if
only out of a becoming modesty, to defer to the higher judgment of this
Court in the consideration of its validity, which is better determined after
a thorough deliberation by a collegiate body and with concurrence of the
majority of those who participated in its discussion.[28]

Such opinion bears no relation to the doctrines on exhaustion of

administrative remedies and hierarchy of courts. Instead, it refers to the

185 | P a g e
duty of a purposeful hesitation which every court, including Us, is charged
before declaring a law unconstitutional, on the theory that the measure was
first carefully studied by the executive and the legislative departments and
determined by them to be in accordance with the fundamental law before it
was finally approved.[29]

It bears emphasis that the Constitution is clear that judicial power, which
includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government, is vested not just in the Supreme Court
but also upon such lower courts established by law.[30] The organic act vests
in Us appellate jurisdiction over final judgments and orders of lower courts
in all cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance or regulation is in question.
[31]
 This means that the resolution of such cases may be made in the first
instance by said lower courts.[32] Under the law, the proper Regional Trial
Court exercises concurrent jurisdiction over extraordinary remedies such as
petitions for certiorari, prohibition and/or mandamus and equally wields
the power to grant provisional relief/s.

In a case where the constitutionality of an executive order was challenged,

the Court stressed that, while lower courts should observe a becoming
modesty in examining constitutional questions, they are nonetheless not
prevented from resolving the same whenever warranted, subject only to
review by the highest tribunal.[33] Besides, even if the case is one of first
impression, the New Civil Code provides that no judge or court shall decline
to render judgment by reason of the silence, obscurity or insufficiency of
the laws.[34] What is missing in the rules may be found in the general
principles of logic, justice and equity.[35] A judge may apply a rule he sees fit
to resolve the issue, as long as the rule chosen is in harmony with general
interest, order, morals and public policy.[36]

Despite the patent procedural defects of the petitions, the Court

nevertheless fully discussed the substantive merits of the case and finally
ruled in favor of President Duterte's decision to allow Marcos' burial at the
LNMB.

186 | P a g e
The substantive issues raised in the MR shall now be discussed in seriatim.

Mootness of the Case

The OSG argues that Marcos' burial at the LNMB on November 18, 2016 is
a supervening event that rendered moot and academic the MRs of
petitioners-movants. Consequently, this Court must refrain from resolving
the issues raised in the MRs for to do so would result in an absurd situation
wherein Marcos' remains would have to be exhumed if the assailed
Decision is overturned. The OSG asserts that petitioners-movants cannot
plead for the exhumation without first complying with Articles 306 to 309
of the New Civil Code.[37]

We disagree.

An issue becomes moot and academic when any declaration thereon would
be of no practical use or value such that there is no actual substantial relief
to which petitioners would be entitled and which would be negated by the
dismissal of the claim.[38] On this basis, the Court holds that the MRs filed
by petitioners-movants have not been mooted by Marcos' burial at the
LNMB. There is still a live controversy between the parties. The MRs were
not rendered illusory considering that the execution pending their
resolution may still be voided in the event that We find merit in the
contentions of petitioners-movants. In that sense, a declaration sustaining
their motions and granting their prayer for relief would still be of practical
value.

SQAO, Petitions for

Contempt and Motion
for Exhumation

Lagmao et al. contend that the right of a party to file a MR is impaired and

that due process is derailed if a decision that is not yet final and executory
is implemented. In this case, the Decision must become final and executory
before the dissolution of the SQAO can take effect. Pending its finality, the
absence of a court order enjoining Marcos' burial at the LNMB is of no
moment because the lifting of the SQAO is contingent upon the finality of
the Decision. Consistent with Tung Ho Steel Enterprises Corporation v.
Ting Guan Trading Corporation,[39] which applied Sections 1 and 4 of Rule
52 of the Rules of Court (Rules), while the reglementary period for filing a

187 | P a g e
MR has not expired, the Decision and the SQAO as an accessory order must
not be enforced. Accordingly, a premature and void execution of the
Decision can be recalled even motu proprio by this Court.

The assertions lack merit.

While the Court concedes that execution takes place only when decisions
become final and executory,[40] there are cases that may be executed
pending appeal[41] or are immediately executory[42] pursuant to the
provisions of the Rules and the statutes as well as by court order. Yet, the
fact that a decision is immediately executory does not prevent a party from
questioning the decision before a court of law.[43]

As regards the SQAO, Tung Ho is inapplicable for having factual and

procedural antecedents that are different from the instant case. Instead, We
should find guidance in Buyco v. Baraquia,[44] which ruled that the lifting of
a WPI due to the dismissal of the complaint is immediately executory even
if the dismissal of the complaint is pending appeal. It was held:

A writ of preliminary injunction is an order granted at any stage of an

action or proceeding prior to the judgment or final order, requiring a party
or a court, agency or a person to refrain from a particular act or acts. It is
merely a provisional remedy, adjunct to the main case subject to the latter's
outcome. It is not a cause of action in itself. Being an ancillary or auxiliary
remedy, it is available during the pendency of the action which may be
resorted to by a litigant to preserve and protect certain rights and interests
therein pending rendition, and for purposes of the ultimate effects, of a
final judgment in the case.

The writ is provisional because it constitutes a temporary measure availed

of during the pendency of the action and it is ancillary because it is a mere
incident in and is dependent upon the result of the main action.

It is well-settled that the sole object of a preliminary injunction, whether

prohibitory or mandatory, is to preserve the status quo until the
merits of the case can be heard. It is usually granted when it is made
to appear that there is a substantial controversy between the parties and
one of them is committing an act or threatening the immediate commission
of an act that will cause irreparable injury or destroy the status quo of the

188 | P a g e
controversy before a full hearing can be had on the merits of the
case.

xxxx

The present case having been heard and found dismissible as it was in fact
dismissed, the writ of preliminary injunction is deemed lifted, its purpose
as a provisional remedy having been served, the appeal therefrom
notwithstanding.

Unionbank v. Court of Appeals enlightens:

". . . a dismissal, discontinuance or non-suit of an action in which a

restraining order or temporary injunction has been
granted operates as a dissolution of the restraining order or
temporary injunction," regardless of whether the period for
filing a motion for reconsideration of the order dismissing the
case or appeal therefrom has expired. The rationale therefor is
that even in cases where an appeal is taken from a judgment
dismissing an action on the merits, the appeal does not suspend
the judgment, hence the general rule applies that a temporary
injunction terminates automatically on the dismissal  of the
action."[45]

By nature, a SQAO is similar to the provisional remedies of TRO and WPI.

[46]
 Thus, when the Court dismissed the petitions in Our Decision, the
SQAO, in effect, became functus officio; it could not stand independent of
the main proceeding.[47] Such dismissal necessarily carried with it the lifting
of the SQAO issued during the pendency of the action. Being interlocutory
and ancillary in character, the order automatically dissolved upon dismissal
of the main case.[48] The SQAO is effective immediately upon its issuance
and upon its lifting despite the existence of the right to file and the actual
filing of a MR or appeal.[49]

Petitioners-movants know for a fact that a SQAO has a definite life span;
that it automatically ceases to have effect upon the expiration of the period.
[50]
 In this case, the SQAO was initially effective until September 12, 2016.
[51]
 It was extended twice, up to October 18, 2016,[52] and then until

189 | P a g e
November 8, 2016[53] when the Decision was eventually promulgated. If a
SQAO has no specific time frame, petitioners need not have pleaded for an
extension and this Court need not have reissued separate resolutions
therefor. With the dismissal of the petitions, a court order for the
reinstatement of the SQAO is again necessary. There must be a new
exercise of judicial power.[54] Petitioners-movants were cognizant of this
rule. On November 11, 2016, Lagman et al. filed a
"Manifestation"[55] praying "that the Honorable Supreme Court may
consider reissuing the Status [Quo] Ante Order and/or advising the
Respondents not to proceed with the said burial pending resolution of the
motion/s for reconsideration to be interposed seasonably. " On the same
day, Ocampo et al. also filed an "Extremely Urgent Motion"[56] praying,
among others, to "[direct] respondents to hold in abeyance or refrain from
executing any plans on the interment of the remains of Marcos Sr. at the
Libingan pending the formal service of the Decision to petitioners, the
resolution of the Motion for Reconsideration to be filed by petitioners, and
the finality of the Honorable Court's Decision[.] " However, We did not act
on these pleadings.

Finally, based on the title, allegations, and relief being sought, this
consolidated case is one for prohibition; hence, essentially in the nature of
petitions for injunction. Under Section 4, Rule 39 of the Rules,
[57]
 judgments in actions for injunction are immediately executory; it
shall be enforceable after their rendition stud shall not be stayed
by an appeal taken therefrom, unless otherwise ordered by the
court.

With the dismissal of the petitions and the lifting of the SQAO, nothing
stood to hinder respondents from acting on and proceeding with Marcos'
burial at the LNMB prior to the expiration of the period to file a MR and
before its resolution. Considering that there is no fault or punishable acts to
speak of, respondents cannot be held guilty of indirect contempt under
Section 3 (c) and (d), Rule 71 of the Rules.[58] On the same ground, neither is
there any legal justification to order the exhumation of the mortal remains
of Marcos and subject the same to forensic examination to ascertain its
authenticity.

Non-publication of AFP Regulations

Lagman et al. raise a new issue. They propound that AFP Regulations 161-

190 | P a g e
375 cannot be used as basis to justify Marcos' burial at the LNMB because,
per certification issued by Director Flordeliza C. Vargas-Trinidad, [59] AFP
Regulations G 161-371 to 161-375 were not filed with the Office of the
National Administrative Register (ONAR) of the University of the
Philippines Law Complex. This failure is in violation of the mandatory
requirement of Sections 3 (1) and 4, Chapter 2, Book VII of the
Administrative Code of 1987. Being legally invalid, defective and
unenforceable, no rights, privileges and obligations have accrued therefrom
or been vested thereby.

They are mistaken.

Chapter 2, Book VII of the Administrative Code of 1987 provides:

SECTION 3. Filing. – (1) Every agency[60] shall file with the University of

the Philippines Law Center three (3) certified copies of every
rule[61] adopted by it. Rules in force on the date of effectivity of this Code
which are not filed within three (3) months from that date shall not
thereafter be the basis of any sanction against any party or persons.
(2) The records officer of the agency, or his equivalent functionary, shall
carry out the requirements of this section under pain of disciplinary action.
(3) A permanent register of all rules shall be kept by the issuing agency and
shall be open to public inspection.

SECTION 4. Effectivity. – In addition to other rule-making requirements

provided by law not inconsistent with this Book, each rule shall become
effective fifteen (15) days from the date of filing as above provided unless a
different date is fixed by law, or specified in the rule in cases of imminent
danger to public health, safety and welfare, the existence of which must be
expressed in a statement accompanying the rule. The agency shall take
appropriate measures to make emergency rules known to persons who may
be affected by them.

The publication requirement in the ONAR is confined to issuances of

administrative agencies under the Executive Branch of the government.
[62]
 Exempted from this prerequisite are the military establishments
in all matters relating exclusively to Armed Forces personnel.[63] A plain
reading of AFP Regulations G 161-371 to 161-375 reveals that they are

191 | P a g e
internal in nature as that they were issued merely for the guidance of the
concerned AFP units which are tasked to administer the LNMB. Moreover,
in view of the nature of the LNMB as an active military cemetery, it cannot
be said that AFP Regulations G 161-375 is a regulation which "adversely
affect, or impose a heavy and substantial burden on, the citizenry in a
matter that implicates the very nature of government we have adopted"
such that registration with the ONAR is not only "a matter of administrative
convenience but x x x a dictate of due process."[64]

In the exercise of executive power, the President has inherent power to

adopt rules and regulations – a power which is different from a delegated
legislative power that can be exercised only within the prescribed standards
set by law – and to delegate this power to subordinate executive officials.
[65]
 On July 12, 1957, then President Carlos P. Garcia, in the exercise of his
powers of control and to reserve public land, issued Proclamation No. 423.
Pursuant thereto, the AFP Chief of Staff issued AFP Regulations G 161-371
on February 2, 1960, which was eventually succeeded by AFP Regulations G
161-375. By granting the AFP Chief of Staff the power to administer a
military reservation site then known as Fort Wm Mckinley (now Fort
Andres Bonifacio), part of which is now the LNMB, former President Garcia
and the presidents subsequent to him effectively delegated their rule-
making power. As expressed in said regulations, they were issued "By
Order of the Secretary of National Defense/Defense Minister, " who, in
turn, is under the Office of the President.

Assuming that AFP Regulations G 161-375 is invalid for non-compliance

with the publication requirement in the ONAR, its invalidity would still not
result in the denial of Marcos' burial at the LNMB. Since the Administrative
Code of 1987 is prospective in its application, President Duterte may apply
AFP Regulations G 161-373 issued on April 9, 1986 [66] as legal basis to
justify the exercise of his presidential prerogative. Under this earlier
regulation, Marcos may be buried at the LNMB because he is a Medal of
Valor Awardee, President and AFP Commander-in-Chief, Minister of
National Defense, Veteran, and Statesman, Moreover, unlike the
succeeding regulations, AFP Regulations G 161-373 contains no provisions
on disqualification for interment.

Compliance with the 1987

Constitution, statutes, and
jurisprudence

192 | P a g e
Petitioners-movants reiterate that AFP Regulations G 161-375 does not
have the force and effect of Law and cannot be a valid source of any right,
obligation or power for violating the Constitution, international and
municipal laws, and foreign and local jurisprudence, which, cannot be
disregarded as they are deemed incorporated in administrative regulations.

Again, the Court is not persuaded.

On the 1987 Constitution

Ocampo et al. maintain that Marcos' burial at the LNMB brazenly violates

the Constitution, the basic principles of which are respect for human rights
and dignity and public accountability. Rosales et al. hold that the spectacle
of burying Marcos at the LNMB undermines the recognition of his crimes
and takes away the very historical premises on which so much of our
present constitutional design and order is anchored. And, Latiph expresses
that Marcos was an epitome of anti-democracy, representing oppression
and tyranny which the Constitution rejects.

It is asserted that We ignored the intent expressed by the Filipinos when

they ratified the Constitution, which, among others, orders the AFP to be
the protector of the people (Sec. 3, Art. II); adopts an independent foreign
policy (Sec. 7, Art. II); directs the State to take positive and effective
measures against graft and corruption (Sec. 27, Art. II); restricts the powers
of the President to suspend the privilege of the writ of habeas corpus and
proclamation of martial law (Sec. 18, Art. VII); expands the power and duty
of the Supreme Court (Sec. 1, Art. VIII); directs that education shall
inculcate patriotism and nationalism, foster love of humanity, respect for
human rights, appreciation of the role of national heroes in the historical
development of the country (Sec. 3 [2], Art. XIV); requires the State to
strengthen the patriotic spirit and nationalist consciousness of the military,
and respect for people's rights in the performance of their duty (Sec. 5 [2],
Art. XVI); creates the Commission on Human Rights (Sec. 17, Art. XIII);
and causes the establishment of the Presidential Commission on Good
Government (PCGG) and the Comprehensive Agrarian Reform
Program (CARP) as well as the enactment of R.A. Nos. 9745, 9851, 10353,
and 10368.

Moreover, for Rosales et al., the cases of Manila Prince Hotel v. GSIS,

193 | P a g e
[67]
 Agabon v. NLRC,[68] Serrano v. Gallant Maritime Services, Inc., et al.,
[69]
 Gutierrez v. House of Representatives Committee on Justice,
[70]
 and Gamboa v. Finance Secretary Teves. et al.[71] prove that the
Constitution has self-executing provisions. Ocampo et al. add that this
Court struck down in Manila Prince Hotel the argument that some
provisions of the Constitution are not self-executing and requires
implementing legislation, and that provisions claimed to be non self-
executing can still be violated if the questioned act is directly opposite the
provisions that require the government to undertake.

Finally, it is contended that our constitutional tradition has consistently

followed the doctrine that the silence of the Constitution does not mean the
absence of constitutional principles and commands. Rosales et
al. cite Angara v. Electoral Commission,[72] wherein the Court, following
the doctrine of necessary implication, appeared to have recognized the
principle of separation of powers and Our power of judicial review. Also,
Ocampo et al. refer to Egerton v. Earl of Brownlow,[73] wherein an act
based on public policy considerations was allegedly struck down despite the
fact that there was no law or jurisprudence prohibiting it.

The Court need not belabor once more in discussing the points raised above
as most, if not all, of the above submissions were considered and passed
upon in the Decision.

As the OSG correctly counters, reliance on Manila Prince Hotel is

misplaced because the issue there was whether Sec. 10, Art. XII of the
Constitution, a provision which was not invoked in this case, is self-
executing. Petitioners-movants repeatedly failed to demonstrate precisely
how Sections 3, 7, 11, 13, 23, 26, 27 and 28 of Art. II; Sec. 18, Art. VII; Sec. 1,
Art. VIII; Sec. 1, Art. XI; Sec. 3[2], Art. XIV; Sec. 5 [2], Art. XVI; and Sec.
17, Art. XIII of the Constitution prohibit Marcos' burial at the LNMB. In
fact, even the Statement[74] dated November 24, 2016, which was issued by
some members of the Constitutional Commission, offers no consolation as
nowhere therefrom could We find any specific constitutional provision/s
violated by the interment of Marcos.

The provisions of the Constitution being invoked in this case are simple and
clear. They are not equivocal as to necessitate resort to extraneous aids of
construction and interpretation, such as the proceedings of the
Constitutional Commission or Convention, in order to shed light on and

194 | P a g e
ascertain the true intent or purpose thereof.[75] Verba legis should prevail
since the presumption is that the words in which the constitutional
provisions are couched express the objective sought to be attained. [76] The
authors of our Constitution were not only the members of the
Constitutional Commission but also all those who participated in its
ratification. Since the ideas and opinions exchanged by a few of its
commissioners should not be presumed to be the opinions of ail of them, it
is the specific text – and only that text – which was the result of the
deliberations of the Commission that must be read and construed. [77] As this
Court, through Justice Leonen, held in David v. Senate Electoral Tribunal:
[78]

In the hierarchy of the means for constitutional interpretation, inferring

meaning from the supposed intent of the framers or fathoming the original
understanding of the individuals who adopted the basic document is the
weakest approach.

These methods leave the greatest room for subjective interpretation.

Moreover, they allow for the greatest errors. The alleged intent of the
framers is not necessarily encompassed or exhaustively articulated in the
records of deliberations. Those that have been otherwise silent and have
not actively engaged in interpellation and debate may have voted for or
against a proposition for reasons entirely their own and not necessarily in
complete agreement with those articulated by the more vocal. It is even
possible that the beliefs that motivated them were based on entirely
erroneous premises. Fathoming original understanding can also
misrepresent history as it compels a comprehension of actions made within
specific historical episodes through detached, and not necessarily better-
guided, modem lenses.

Moreover, the original intent of the framers of the Constitution is not

always uniform with the original understanding of the People who ratified
it. In Civil Liberties Union:

While it is permissible in this jurisdiction to consult the debates and

proceedings of the constitutional convention in order to arrive at the reason
and purpose of the resulting Constitution, resort thereto may be had only
when other guides fail as said proceedings are powerless to vary the terms
of the Constitution when the meaning is clear. Debates in the constitutional
195 | P a g e
convention "are of value as showing the views of the individual members,
and as indicating the reasons for their votes, but they give us no light as to
the views of the large majority who did not talk, much less of the mass of
our fellow citizens whose votes at the polls gave that instrument the force of
fundamental law. We think it safer to construe the constitution from what
appears upon its face." The proper interpretation therefore depends more
on how it was understood by the people adopting it than in the framer's
understanding thereof.

Considering that the Court may not ascribe to the Constitution meanings
and restrictions that would unduly burden the powers of the President,
[79]
 its plain and unambiguous language with respect to his power of control
as Chief Executive and Commander-in-Chief should be construed in a sense
that will allow its foil exercise. It cannot be conveniently claimed that
various provisions of the Constitution, taken together, necessarily imply the
prohibition of Marcos' burial at the LNMB. The silence of the Constitution
cannot be unreasonably stretched to justify such alleged proscription.

On R.A. No. 289

Petitioners Ocampo et al. and Lagman et al. insist that R.A. No. 289 is

applicable in determining the standards on who are entitled to be buried at
the LNMB. As a special law, its provisions prevail over the power to allocate
lands of the public domain granted to the President by the Administrative
Code of 1987. Its salutary objective encompasses all subsequent shrines or
memorials as interment grounds for former Presidents, heroes, and
patriots, regardless of the time it was constituted and its location.

While We agree that R.A. No. 289 is an existing and valid law for not having
been amended or repealed by subsequent ones, it is maintained that said
law and the LNMB are unrelated to each other, Up to now, the Congress
has deemed it wise not to appropriate any funds for the construction of the
National Pantheon or the creation of the Board on National Pantheon.
Significantly, the parcel of land subject matter of Proclamation No. 431,
which was later on revoked by Proclamation No. 42, is different from that
covered by Proclamation No. 208. Even Justice Caguioa's dissent, as to
which Justice Jardeleza concurred, concluded that it is non sequitur to
argue the applicability of R.A. No. 289, or the standards indicated therein,
to the LNMB because the land on which the National Pantheon was to be
196 | P a g e
built refers to a discrete parcel of land that is totally distinct from the site of
the LNMB. Except for Justice Leonen, the other justices who dissented to
the majority opinion were silent on the matter.

On R.A. No. 10368

The applicability of R.A. No. 10368 was reiterated by petitioners-movants.

Ocampo et al. posit that Marcos' burial at the LNMB is diametrically
opposed and evidently repugnant to the legislative intent and spirit of R.A.
No. 10368, which statutorily declared the policy of the State to recognize
the heroism and sacrifices of all human rights violations victims (HRVVs)
during the Marcos regime. The HRVVs cannot be recognized and their
dignity cannot be restored if the perpetrator is extolled and given honors
befitting that of a hero, tantamount to exonerating him. from the abuses of
Martial Law. To recall Justice Leonen raised the same arguments in his
dissent, stating that Marcos' burial at the LNMB is violative of R.A. No.
10368 because it may be considered as an effort "to conceal abuses during
the Marcos regime" or to "conceal x x x the effects of Martial Law"; that it
undermines the recognition of his complicity.

On their part, Lagman et al. and Rosales et al. assert that aside from the
repealing clause expressly provided for under Sec, 31 of R.A. No. 10368, the
incompatibility between AFP Regulations G 161-375 and said law satisfies
the standard of effecting a repeal by implication. Under the doctrine of
necessary implication, every statutory grant of power, right or privilege is
deemed to include all incidental power, right or privilege.

We differ.

The provisions of R.A. No. 10368 are straightforward. The rights of HRVVs
to recognition and reparation have been set and defined under the law,
which grants specific remedies. Glaringly, not one of its provisions could be
construed to justify denying former Pres. Marcos or his family of any rights
which have been vested by law or regulation. R.A. No. 10368 repudiated no
commendation or revoked any distinction attained by Marcos during his
lifetime, particularly those which he accomplished outside the period of
September 21, 1972 to February 25, 1986. Neither did it nullify any right or
benefit accruing to him because of such achievements. The Court cannot do
more than what the law clearly provides. To stretch its scope is not only
unreasonable but also tantamount to judicial legislation.

197 | P a g e
Based on the history of the passage of R.A. No. 10368 and the events that
led to or precipitated its enactment,[80] what the legislature actually had in
mind is accurately reflected in the language of the law. As a matter of fact,
in the sponsorship speech of Senator Francis G. Escudero, he expressed
that the "bill seeks to provide reparation and recognition of the survivors
and relatives of the victims of human rights during the regime of former
Pres. Ferdinand Marcos" and that "[i]n order to qualify for compensation
under this Act, the human rights violation must have occurred during the
period from September 21, 1972 to February 25, 1986."[81] In the Senate,
Senators Franklin M. Drilon and Panfilo M. Lacson withdrew their
reservation to interpellate on the measure.[82] Likewise, in the House of
Representatives (House), no member signified an intention to ask any
question during the period of sponsorship and debate, and no committee or
individual amendments were made during the period of amendments.
[83]
 Thus, this Court is of the view that the statutory omission – the non-
inclusion of the prohibition of Marcos' burial at the LNMB – was both
deliberate and significant. Congress itself did not consider it as part and
parcel of reparation to HRVVs.

Even on the assumption that there is in fact a legislative gap caused by such
an omission, neither could the Court presume otherwise and supply the
details thereof, because a legislative lacuna cannot be filled by judicial fiat.
Indeed, courts may not, in the guise of interpretation, enlarge the scope of a
statute and include therein situations not provided nor intended by the
lawmakers. An omission at the time of the enactment, whether careless or
calculated, cannot be judicially supplied however after later wisdom may
recommend the inclusion. Courts are not authorized to insert into the law
what they think should be in it or to supply what they think the legislature
would have supplied if its attention has been called to the omission. [84]

Indeed, the Court cannot supply legislative omission. We cannot engraft

upon a law something that has been omitted but is believed as ought to
have been embraced.[85] This Court cannot, under its power of
interpretation, supply the omission even though the omission may have
resulted from inadvertence or because the case in question was not
foreseen or contemplated."[86] If the law is too narrow in scope or has
shortcoming, it is for the Legislature alone to correct it by appropriate

198 | P a g e
enactment, amendment or even repeal.[87]

With regard to the non-monetary reparation to HRVVs under Sec. 5 of R,A.

No. 10368, Rosales et al. argue that the Court's narrow interpretation is
inconsistent with the prevailing jurisprudence and international law for
failure to recognize the all-encompassing concept of the right to an effective
remedy. To them, non-monetary reparation is not limited to a hollow
commitment to provide services from government agencies including
public respondents.

We are not amendable.

It is well established that courts may avail themselves of extrinsic aids such
as the records of the deliberations or the actual proceedings of the
legislative body in order to assist in determining the construction of a
statute of doubtful meaning. Where there is doubt as to what a provision of
a statute means, the meaning put to the provision during the legislative
deliberation or discussion on the bill may be adopted.[88]

Notably, R.A. No. 10368 is the consolidation of Senate Bill (S.B.) No.

3334[89] and House Bill (H.B.) No. 5990[90] of the 15th Congress. S.B. No.
3334 substituted S.B. Nos. 2615[91] and 3330,[92] which were both referred to
and considered by the Senate Committees on Justice and Human Rights
and Finance. While S.B. No. 3334 did not provide for non-monetary
compensation,[93] H.B. No. 5990[94] afforded such benefit. The Conference
Committee on the Disagreeing Provisions of H.B. No. 5990 and S.B. No.
3334 resolved to adopt the provision of the House of Representatives on
non-monetary compensation (appearing as Section 5 of now R.A. No.
10368) but did not include its definition under H.B. No. 5990. [95] As defined
by the House, it "refers to a non-pecuniary compensation given to a victim
of human rights violation or members of the family to restore the family's
honor and dignity and shall include, but not limited to, psychotherapy,
counseling, medical care, social amelioration and honorific
recognition."[96] Hence, interpretation of the term should be viewed in light
of this definition such that any non-monetary compensation to be granted
must be similar in nature with the enumerated services.

If a statute is plain and free from ambiguity, it must be given its literal
meaning or applied according to its express terms, without any attempted
interpretation, and leaving the court no room for any extended

199 | P a g e
ratiocination or rationalization.[97] When the letter of the law is clear, to
seek its spirit elsewhere is simply to venture vainly, to no practical purpose,
upon the boundless domains of speculations.[98] A strictly literal
interpretation of a statute may be disregarded and the court may consider
the spirit and reason of the statute where a literal meaning would be
impossible, render the provision/s meaningless, or lead to inconvenience,
absurdity, contradiction, injustice or mischievous results, or would defeat
the clear purpose of the lawmakers.[99] Liberality has a place only when,
between two positions that the law can both accommodate, the more
expansive or more generous option is chosen.[100] It has no place where no
choice is available at all because the terms of the law do riot at all leave
room for discretion.[101]

The function of the courts is jus dicere and not jus dare; to interpret law,
and not to make law or give law.[102] Our duty is not to amend the law by
enlarging or abridging the same.[103] This Court should not make or
supervise legislation, or under the guise of interpretation, modify, revise,
amend, distort, remodel, or rewrite the law, or give the law a construction
which is repugnant to its terms.[104] We cannot interpose our own views as
to alter them.[105] Simply put, the Court, must not read into the law what is
not there.[106] The letter of the law cannot be disregarded on the pretext of
pursuing its spirit.[107] To do so would be engaging in judicial legislation,
which is abjured by the trias politica, principle and in violation of one of
the most basic principles of a republican and, democratic government – the
separation of powers.[108]

Judicial power covers only the recognition, review or reversal of the policy
crafted by the political departments if and when a case is brought before it
on the ground of illegality, unconstitutionality or grave abuse of
discretion (i.e,, blatant abuse of power or capricious exercise thereof).
[109]
 The determination of the wisdom, fairness, soundness, justice,
equitableness or expediency of a statute or what "ought to be" as a matter of
policy is within the realm of and should be addressed to the legislature.
[110]
 If existing laws are inadequate, the policy-determining branches of the
government, specifically the duly elected representatives who carry the
mandate of the popular will, may be exhorted peacefully by the citizenry to
effect positive changes.[111] True to its constitutional mandate, the Court
cannot craft and tailor statutory provisions in order to accommodate all of
situations no matter how ideal or reasonable the proposal may sound.
[112]
 No matter how well-meaning, We can only air Our views in the hope

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that Congress would take notice.[113]

x x x [The] Court should give Congress a chance to perform its primordial

duty of lawmaking. The Court should not pre-empt Congress and usurp its
inherent powers of making and enacting laws. While it may be the most
expeditious approach, a short cut by judicial fiat is a dangerous proposition,
lest the Court dare trespass on prohibited judicial legislation.[114]

Judicial activism should never be allowed to become judicial exuberance.

[115]
 In this case, no amount, of logic or convenience can convince Us to
perform an insertion of a matter that was clearly not included in R.A. No.
10368 as enacted. Just like his return to the country, Marcos' burial at the
LNMB is a delicate and complex subject with far reaching implications. No
one can deny this as even the Post-EDSA presidents, including the two
Aquino governments, as well as the past Congresses did not dare, wittingly
or unwittingly, to finally put the issue to rest. In view of its political (and
even economic) repercussions, We must leave the task of enlarging the
scope of benefits to the HRVVs to the legislative authority where it properly
belongs and which must be assumed to be just as capable of compassionate
consideration as courts are thought to be.[116]

Observance of the IHR Laws

Rosales et al. propound that mere existence of human rights laws,

administrative rules, and judicial issuance in the Philippines is not
equivalent to full compliance with international law standards. It is
contended that if the State is to ensure its commitment to the principles of
international human rights law, HRVVs must be given full satisfaction and
guarantees of non-repetition as defined by Principles 22 and 23 of
the Basic Principles and Guidelines on the Right to a Remedy and
Reparation for Victims of Gross Violations of International Human Rights
Law and Serious Violations of International Humanitarian Law ("Basic
Principles and Guidelines"). Similarly, Ocampo et al. hold that the HRVVs
are entitled to restitution, compensation, rehabilitation, and satisfaction as
contemplated in Sections 19 to 22 of the Basic Principles and
Guidelines. Essentially, as the Chief Justice expressed in her dissent, there
must holistic reparation – financial and symbolic.

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The Basic Principles and Guidelines and the Updated Set of Principles for
the Protection and. Promotion of Human Rights Through Action to
Combat Impunity ("UN Principles on Impunity") are neither a treaty nor
have attained the status of generally accepted principles of international
law and/or international customs. Justice Arturo D. Brion fittingly
observed in his Separate Concurring Opinion that they do not create legally
binding obligations because they are not international agreements but are
considered as "'soft law" that cannot be interpreted as constraints on the
exercise of presidential prerogative. Consistent with Pharmaceutical and
Health Care Assoc. of the Phils, v. Health Sec. Duque III,[117] the Basic
Principles and Guidelines and the UN Principles on Impunity are merely
expressions of non-binding norms, principles, and practices that influence
state behavior; therefore, they cannot be validly considered as sources of
international law that is binding upon the Philippines under Art. 38 (1),
Chapter II[118] of the Statute of the International Court of Justice.

It is evident from the plain text of the Basic Principles and Guidelines and

the UN Principles on Impunity that they are recommendatory in character.
The Resolution of the General Assembly adopting the Basic Principles and
Guidelines states:

2. Recommends that States take the Basic Principles and Guidelines into
account, promote respect thereof and bring them to the attention of
members of the executive bodies of government, in particular law
enforcement officials and military and security forces, legislative bodies, the
judiciary, victims and their representatives, human rights defenders and
lawyers, the media and the public in general; (Underscoring ours)

As to the UN Principles on Impunity, the concluding portion of its

Preamble reads:

Pursuant to the Vienna Declaration and Programme of Action,

the following principles are intended as guidelines to assist States in
developing effective measures for combating impunity. (Underscoring ours)

Had the Congress intended to incorporate the provisions of the Basic

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Principles and Guidelines and the UN Principles on Impunity, which was
already adopted by tine United Nations as early as 2005, it could have done
so by expressly mentioning them in the Declaration of Policy under Sec. 2
of R.A. No. 10368. During the consideration of S.B. No. 3334 and H.B. No.
5990, petitioners-movants should have petitioned the Commission on
Human Rights to make the necessary recommendations to the Congress or
otherwise directly lobbied to the lawmakers to include the Basic Principles
and Guidelines and the UN Principles on Impunity in the proposed law.
They did not. Nonetheless, they can do so for the enactment of amendatory
laws.

While the States have a duty to repair violations of human rights and
international humanitarian law, the modalities of the reparation vary
according to the right violated, the gravity of the violation, the harm done,
or the persons affected. The Basic Principles and Guidelines recognizes
that the different forms of reparation may be awarded depending on the
facts of each case arid whenever applicable.

Even if the Basic Principles and Guidelines and the UN Principles on

Impunity are treated as binding, international laws, they do not prohibit
Marcos' burial at the LNMB. We already noted in the Decision that they do
not derogate against the right to due process of the alleged human rights
violator. Aside from Art. 14, Part III of the ICCPR,[119] XIII (27) of the Basic
Principles and Guidelines[120] and Principle 9 of the UN Principles on
Impunity[121] are clear and unequivocal. Certainly, observance of due
process must not be sacrificed in pursuing the HRVVs' right to full and
effective remedy under the international human rights law. The recognition
and protection of a person's human rights and dignity must not trample
upon that of another who we do not like or those who are perceived to be
against us. Justice and equity demands that there be a balancing of
interests in the enforcement of both. For the Constitution is a law for all
classes of men at all times and there is only one Bill of Rights with the same
interpretation for both unloved and despised persons on one hand and the
rest who are not so stigmatized on the other.[122]

Disqualification under the AFP Regulations

Dishonorable Discharge

Rosales et al. assert that "active service," as defined in Sec. 3 of P.D. No.

203 | P a g e
1638, contemplates both civilian and military service. Thus, the term
"dishonorable discharge" applies equally to civilians who are guilty of
conduct so reprehensible and tainted with manifest disrespect to the rule of
law. In Marcos' case, he was ousted from the Presidency by the Filipinos
and was forced into dishonorable exile abroad. Lagman et al. posit that
Marcos' burial at the LNMB would completely nullify all that the EDSA
People Power Revolution stands for. It would desecrate the spirit of EDSA
as it would sweep under the rug of impunity the cardinal sins of Marcos
against the Filipinos.

The Court subscribes to the OSG's contention that the two instances of
disqualification under AFP Regulations G 161-375 apply only to military
personnel in "active service." For the purpose of P.D. No. 1638, the
definition of "active service" under Sec. 3 covers the military and civilian
service rendered prior to the date of separation or retirement from the AFP.
Once separated or retired, the military person is no longer considered as in
"active service." In addition, the term dishonorable discharge in AFP
Regulations G 161-375 refers to an administrative military process.
Petitioners-movants have not shown that Marcos was dishonorably
discharged from military service under the law or rules prevailing at the
time his active service was terminated or as set forth by any of the grounds
and pursuant to the procedures described in AFP Circular 17, Series of
1987[123] issued on October 2, 1987.

Moral Turpitude

Ocampo et al., Lagman et al., Rosales et al., and Latiph argue that the

November 8, 2016 Decision distinctly stands out as an aberration that
contradicts and undoes the previous court rulings against Marcos. They
contend that the majority opinion chose to ignore Republic v.
Sandiganbayan (First Division),[124] Republic v. Sandiganbayan,
[125]
 Marcos, Jr. v. Rep. of the Phils.,[126] Marcos v. Sec. Manglapus,
[127]
 Dizon v. Brig. Gen. Eduardo,[128] Mijares v. Hon. Rañada,[129] PCGG v.
Judge Peña,[130] Bisig ng Manggagawa sa Concrete Aggregates, Inc. v.
NLRC,[131] Galman v. Sandiganbayan,[132] In Re Estate of Marcos Human
Rights Litigation[133] and Hilao v. Estate of Marcos,[134] which characterized
the Martial Law as a regime filled with human rights violations and
memorialized Marcos as a dictator who plundered the country. Rosales et
al. opine that it is immaterial that the decisions of this Court and the
foreign, tribunals were mere civil in character because all those litigation

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involved exhaustive presentation of evidence wherein Marcos and his heirs
were fully heard and have enjoyed due process before courts of competent
jurisdiction.

We disagree.

The cited cases cannot be relied upon to bar Marcos' burial at the
LNMB. Galman v. Sandiganbayan, Marcos v. Sec. Manglapus, Republic v.
Sandiganbayan, Marcos, Jr. v. Rep. of the Phils., PCGG v. Judge
Peña, and Mijares v. Hon. Rañada did not involve the power and authority
of the President to order an interment at the LNMB, while Republic v.
Sandiganbayan (First Division), Republic v. Sandiganbayan, and Marcos,
Jr. v. Rep. of the Phils. pertained to forfeiture cases under R.A. No. 1379,
[135]
 which this Court declared as civil in nature. More importantly, these
cases did not convict Marcos of a crime. The complaints, denunciations,
and charges against him no matter how numerous and compelling do not
amount to conviction by final judgment of an offense involving moral
turpitude. Neither mere presence of an offense involving moral turpitude
nor conviction by final judgment of a crime not involving moral turpitude
would suffice. The twin elements of "conviction by final judgment" and
"offense involving moral turpitude" must concur in order to defeat one's
entitlement for burial at the LNMB. The conviction by final judgment
referred to is a criminal conviction rendered by a civil court, not one that is
handed down by a general court martial. The highest quantum of evidence
– proof beyond reasonable doubt, not preponderance of evidence or
substantial evidence – must be satisfied. Rosales et al., therefore, erred in
supposing that Marcos could never be disqualified under AFP Regulations
G 161-375 because it would be absurd that he would appoint a Judge
Advocate General to prosecute him and convene a General Court Martial to
convict him.

Rosales et al., Latiph, and De Lima further hold that Sec. 14 (2) Art. III of
the Constitution anent the right of the accused to be presumed innocent
arises only in criminal prosecution. Correspondingly, Marcos cannot avail
such right because he was not charged criminally; he was not under trial;
and would not be sentenced to a penalty where he stood to lose his life or
liberty. Moreover, a claim for violation of due process by a criminal
offender presupposes that the People of the Philippines was afforded a fair
opportunity to arrest and prosecute the accused in a court of competent
jurisdiction. In Marcos' case, the People were unable to criminally

205 | P a g e
prosecute him because he was ousted from the presidency and died in a
foreign land. Under the principle of territoriality in criminal law, the long
arm of the law could not reach him for lack of jurisdiction over his person.

The arguments are untenable;

Aside from criminal prosecution, the presumption of innocence applies in

the cases of attorney[136] under suspension or disbarment proceedings,
judge[137] and court personnel[138] with pending administrative complaint,
detained person[139] before a military tribunal, and employee[140] in labor
cases.

The right to be presumed innocent until proven guilty is subsumed in the

constitutional right of every person not to be held to answer for a criminal
offense without due process of law.[141] This constitutional mandate refers to
any person, not only to one who has been arrested, detained or otherwise
deprived of liberty, or against whom a complaint or information was
formally filed, or who is undergoing trial, or who is awaiting judgment by
the trial court, or whose judgment of conviction is pending appeal.
In Herras Teehankee v. Rovira,[142] the Court observed that bail is
constitutionally available to ail persons, even those against whom no formal
charges are filed. By parity of reasoning, there is no legal or just ground for
Us to deny the constitutional right to be presumed innocent to one who is
not even criminally prosecuted. Similarly, to place such person in a less
favored position than an accused in a criminal case would be, to say the
least, anomalous and absurd. It is illogical, if not inane. If there is a
presumption of innocence in favor of one already formally charged with
criminal offense, a fortiori, this presumption should be indulged in favor of
one who is yet to be charged.

Likewise, it is entirely inaccurate to proclaim that there was no opportunity

to arrest, try, and convict Marcos for his alleged criminal acts. Petitioners-
movants must recall that Marcos v. Sec. Manglapus arose precisely
because the former president intended to return to the Philippines, but
then President Corazon C. Aquino refused on the grounds of national
security and public safety. We sustained the exercise of her executive
power. On hindsight, Marcos could have been prosecuted for his alleged
offenses had he been allowed to come back. As what happened, the Court is
unaware of any criminal case that was commenced against Marcos until his
death.

206 | P a g e
Rosales et al. are also grossly mistaken to contend that a deceased person
cannot claim any demandable right to due process for it is exclusively
reserved to a person with civil personality. As the assailed Decision
indicated, no less than the Constitution intends that "full respect for human
rights [covers] every stage of a person's development 'from the time he
becomes a person to the time he leaves this earth.'"[143] In fact, in our system
of laws, all criminal liability is totally extinguished by death.[144] This applies
to every Filipino, not. just Marcos.

Lagman et al. advance that Marcos must be assessed in his totality as a

person, since he did not err as an ordinary human being. He was a
disgraced President who was deposed by the sovereign people because he
was a dictator, plunderer, and human rights violator; he sinned against the
multitude of Filipinos as the magnitude of his transgressions permeated
and ruined the very core of the Philippines' democratic society and
developing economy; and he was not a noble soldier for faking his wartime
exploits and credentials. Of the same view, Ocampo et al. assert that the
record of Marcos as a soldier cannot be dichotomized and separated from
his record as a President because he is no ordinary soldier and president.
As Marcos v. Sec. Manglapus held, he is "in a class by itself."

The contentions lack merit.

We already pointed out in Our Decision that the NHCP study is limited to
the conclusion that Marcos did not receive the Distinguished Service Cross,
the Silver Medal, and the Order of the Purple Heart, and that the U.S.
Government never recognized the Ang Mga Maharlika and his alleged
leadership of said guerilla unit. It is incomplete as to his entire career. It did
not cover and had no adverse findings with respect to his other
accomplishments as a legislator, a Secretary of National Defense, a military
personnel, a veteran, and a Medal of Valor awardee. When the Decision
declared that Marcos is "just a human who erred like us, " it was never the
intention of the ponente to trivialize or, as petitioners-movants perceive it
to be, forgive and forget what Martial Law has done to the HRVVs and our
nation in general. There was no attempt to erase his accountability for the
alleged human rights violations and the plunder he committed during the
period. What the comparison only meant was to convey the truth that no
human is perfect; that it is in our nature to commit sins and make mistakes.
The Decision did not pass upon the issue of whether Marcos' "errors" were

207 | P a g e
deliberately or innocently done, extensive or insignificant in scale, or
heinous or meritorious in character.

Moreover, the case of Cudia v. The Superintendent of the

Philippine Military Academy (PMA),[145] which was invoked by
Rosales et al., is inapplicable. The factual antecedents are different and
the applicable laws are unrelated: Cudia involves the right to due process of
a military cadet who was dismissed from the Philippine Military Academy
(PMA) while this case involves the right to be buried of a military personnel
at the LNMB; Cudia involves the PMA cadet's Honor Code and Honor
System Handbook while this case involves the AFP Regulations G 161-375;
and Cudia involves the exercise of academic freedom by the military
academy while this case involves the exercise of executive power by the
President.

Even if Cudia applies, there is actually no conflict. In that case, the Court

affirmed the decision of the PMA, noting that it complied with the due
process requirement of the law. We did not substitute the judgment of the
military; did not impose standards other than what is traditionally and
legally been practiced; and did not enforce a penalty different from what
was imposed by the PMA, On the other hand, this case also involves a
military regulation that We upheld for not being contrary to the prevailing
Constitution, laws, and jurisprudence. This Court affirms the standards as
to who may be buried at the LNMB, which are based on our unique military
traditions and legal milieu, as codified in various AFP Regulations that took
into account existing laws such as C.A. No. 408, P.D. No. 1638, and their
amendments.

Finally, the Court resolves the challenge of Rosales et al. with respect to

Our citation of U.S. rules and regulations on Arlington National
Cemetery (Arlington). First, it must be stressed that We did not heavily
rely on the list provided by the Code of Federal Regulations (C.F.R.) as to
who are entitled to be buried at the LNMB. The rules and regulations on
Arlington, as found in the C.F.R., were mentioned because of their apparent
similarity with AFP Regulations G 161-375. They were not the main basis of
Our Decision, which can stand on its own even without such
reference. Second, We also did not forget to cite the very statute that
explicitly enumerates those who are prohibited from interment
in Arlington. This is reflected in footnotes 161 and 162 of the
Decision, Third, We cannot consider the cases of Timothy Mcveigh and

208 | P a g e
Russel Wayne Wagner, allegedly U.S. military men who were denied the
right to be buried at the military cemetery. Newspaper or electronic reports
cannot be appreciated by the Court, "not because of any issue as to their
truth, accuracy, or impartiality, but for the simple reason that facts must be
established in accordance with the rules of evidence."[146] And Fourth, the
majority members of the Court did not "insist" the need of a prior
proceeding in accordance with § 553.21 of the C.F.R. before any
disqualification under 38 U.S.C. § 2411 can be applied. We merely echoed
the U.S. rules with respect to a person found to have committed a Federal
or State capital crime but who has not been convicted by reason of not
being available for trial due to death or flight to avoid prosecution. We do
not imply that exactly the same U.S. rules should be applied in Marcos' case
but only emphasized the need to guarantee the rights of the accused who
enjoys the presumption of innocence. In this jurisdiction, there has been no
identical or similar rules to apply; hence, this Court cannot direct any
compliance. Instead, Our lone guide is to determine whether, under AFP
Regulations G 161-375, Marcos was dishonorably
separated/reverted/discharged from service or whether he was convicted
by final judgment of an offense involving moral turpitude, Nothing more,
nothing less.

MOA between Ramos

and the Marcoses

According to Lagman et al., the 1992 Memorandum of

Agreement (MOA), which was executed between the Government of the
Republic of the Philippines, represented by then Department of Interior
and Local Government (DILG) Secretary Rafael M. Alunan III, and the
Marcos family, represented by Mrs. Imelda R. Marcos, is a valid and
enforceable government contract, it being not contrary to law or public
policy, that has never been impugned. As such, it cannot be amended,
revoked or rescinded by the subsequent President in order to honor a
personal campaign promise. If the sanctity of a private, eontrgct is
protected by the non-impairment clause, with more reason is a State
contract inviolable. Also, under the MOA, the Marcos family has irrevocably
waived any entitlement of the late president to be buried at the LNMB.
They are in estoppel and are guilty of laches because they have not
instituted any formal demand or action for 24 years since it was signed.

The Court cannot agree.

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The decision of former President Fidel V. Ramos in disallowing Marcos'
burial at the LNMB is not etched in stone; it may be modified by succeeding
administrations. If one Congress cannot limit or reduce the plenary
legislative power of succeeding Congresses,[147] so, too, the exercise of
executive power by the past president cannot emasculate that of the
incumbent president. The discretionary act of the former is not binding
upon and cannot tie the hands of the latter, who may alter the same.

In this case, the MOA expressly provides that "any transfer of burial

grounds shall be with prior clearance with the Philippine Government
taking into account socio-political climate. " When President Duterte
issued his verbal directive, he effectively gave the required prior
government clearance bearing in mind the current socio-political climate
that is different from the one prevailing at the time of former President
Ramos. His factual foundation, which is based on his presumed wisdom
and possession of vital information as Chief Executive and Commander-in-
Chief, cannot be easily defeated by petitioners-movants' naked assertions.
Certainly, the determination of whether Marcos' burial at the LNMB will
best serve the public interest lies within the prerogative of the President.

The powers of the Philippine President is not limited only to the specific
powers enumerated in the Constitution, i.e., executive power is more than
the sum of specific powers so enumerated.[148] Thus, he or she should not be
prevented from accomplishing his or her constitutionally and statutorily
assigned functions and discretionary responsibilities in a broad variety of
areas. Presidential prerogative ought not be fettered or embarrassed as the
powers, express or implied, may be impermissibly undermined. If the act is
within the exercise of the President's discretion, it is conclusive; if it is
without authority and against law, it is void.[149] In the absence of
arbitrariness and grave abuse, courts have no power or control over acts
involving the exercise of judgment of the Executive Department. The
ultimate power over alienable and disposable public lands is reposed in the
President of the Philippines.[150] More so, a judicial review should not
interfere with or intrude into a great extent on his needed prerogatives in
conducting military affairs, We have held that the commander-in-chief
power of the President is a wholly different and independent specie of
presidential authority such that, by tradition and jurisprudence, it is not
encumbered by the same degree of restriction as that which may attach to
the exercise of executive control.[151]

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With the foregoing, it is unnecessary for Us to discuss whether the Marcos
family are in estoppel or guilty of laches.

National reconciliation and forgiveness

As long as it is proven that Marcos' burial at the LNMB is not contrary to

the prevailing Constitution, laws, and jurisprudence, public respondents
need not show exactly how such act would promote the declared policy of
national healing and reconciliation. Regardless of petitioners-movants'
disagreement with it, the rationale for the assailed directives pertains to the
wisdom of an executive action which is not within the ambit of Our judicial
review. As well, the disputed act, just like a law that is being challenged, is
tested not by its supposed or actual result but by its conformity to existing
Constitution, laws, and jurisprudence. Hence, whether or not Marcos'
burial at the LNMB would in fact cause the healing of the nation and
reconciliation of the parties is another matter that is immaterial for
purposes of resolving this case and irrelevant to the application of AFP
Regulations G 161-375. It is presumptuous for petitioners-movants to claim
that Marcos' burial at the LNMB will not bring about genuine national
healing and closure. While the HRYVs may find it hard to accept, it is not
improbable that the rest of the Filipinos may think and feel differently. In
either case, the Court cannot engage in conjectures and surmises. Instead,
Our policy is to presume that the acts of the political departments are valid
in the absence of a clear and wimistakable showing to the contrary. To
doubt is to sustain.[152]

Equally, We cannot pass upon the propositions that Marcos' burial at the
LNMB would cleanse the late President Marcos of his sins or consecrate his
misdeeds (Lagman et al.); or would clear the image of the Marcos family as
they once again attempt to rise into power (Rosales, et al); or would
politically rehabilitate their already tarnished reputation and give a shot in
the arm to their moribund fanatical followers (Ocampo et al.); or would
vindicate him or exonerate each and every plunderer, thief, murderer,
human rights violator, and torturer in government or justify every immoral
and unlawful act of crooks, trapos, cheaters, and other villains in public
office, giving honor to impunity in public office and to a public life without
moral principles (De Lima). All these allegations are pure and simple
speculations that are devoid of any factual moorings.

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Historical revisionism

We concur with Ocampo et al. that this Court was also a victim of Marcos'
authoritarian rule and that it cannot isolate itself from history because it
was and is a part of it. However, as Justice Brion put it, while the Court is
not blind to history, it is not a judge thereof. Accordingly, We should leave
Marcos' legacy to the judgment of history. The assailed Decision aptly
ruled:

Contrary to petitioners' postulation, our nation's history will not be

instantly revised by a single resolve of President Duterte, acting through the
public respondents, to bury Marcos at the LNMB. Whether petitioners
admit it or not, the lessons of Martial Law are already engraved, albeit in
varying degrees, in the hearts and minds of the present generation of
Filipinos. As to the unborn, [We] must [say] that the preservation and
popularization of our history is not the sole responsibility of the Chief
Executive; it is a joint and collective endeavor of every freedom-loving
citizen of this country.

Notably, complementing the statutory powers and functions of the Human

Rights Victims' Claims Board and the HRVV Memorial Commission in the
memorialization of HRVVs, the National Historical Commission of the
Philippines (NHCP), formerly known as the National Historical
Institute (NHI), is mandated to act as the primary government agency
responsible for history and is authorized to determine all factual matters
relating to official Philippine history. Among others, it is tasked to: (a)
conduct and support all kinds of research relating to Philippine national
and local history; (b) develop educational materials in various media,
implement historical educational activities for the popularization of
Philippine history, and disseminate, information regarding Philippine
historical events, dates, places and personages; and (c) actively engage in
the settlement or resolution of controversies or issues relative to historical
personages, places, dates and events. Under R.A. Nos. 10066 (National
Cultural Heritage Act of 2009) and 10086 (Strengthening Peoples'
Nationalism Through Philippine History Act), the declared State policy is
to conserve, develop, promote, and popularize the nation's historical and
cultural heritage and resources. Towards this end, means shall be provided
to strengthen people's nationalism, love of country, respect for its heroes
and pride for the people's accomplishments by reinforcing the importance

212 | P a g e
of Philippine national and local history in daily life with the end in view of
raising social consciousness. Utmost priority shall be given not only with
the research on history but also its popularization.[153]

The President of the Philippines has no authority to unilaterally declare

anyone a hero. Also, while it is mandatory for the courts to take judicial
notice of Philippine history, the NHCP has the primary jurisdiction with
respect thereto.[154] It is the principal government agency responsible for
history and has the authority to determine all factual matters relating to
official Philippine history. In its task to actively engage in the settlement or
resolution of controversies or issues relative to historical personages,
places, dates and events, the NHCP Board is empowered to discuss and
resolve, with finality, issues or conflicts on Philippine history. [155] The Court
only steps in if an action is brought before it to determine whether there is
grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the NHCP.

Equitable consideration

Rosales et al. contend that the Court should apply equity and extend
equitable protection to the HRVVs because Marcos' burial at the LNMB
causes them irreparable injury as it re-inflicts their trauma and grief while
the Marcos' heirs have not shown any injury that they would sustain by its
denial.

The argument is untenable.

Justice is done according to law. As a rule, equity follows the law. There
may be a moral obligation, often regarded as an equitable consideration
(meaning compassion), but if there is no enforceable legal duty, the action
must fail although the disadvantaged party deserves commiseration or
sympathy.

The choice between what is legally just and what is morally just, when these
two options do not coincide, is explained by Justice Moreland in
Vales vs. Villa, 35 Phil. 769. 788 where he said:

213 | P a g e
Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may
do foolish things, make ridiculous contracts, use miserable judgment, and
lose money by them – indeed, all they have in the world;  but not for that
alone can the law intervene and restore. There must be, in addition,
a violation of law, the commission of what the law knows as an actionable
wrong before the courts are authorized to lay hold of the situation and
remedy it.[156]

Equity is "justice outside legality,"[157] It is applied only in the absence of

and never against statutory law or, as in this case, appropriate AFP
regulations. Courts exercising equity jurisdiction are bound and
circumscribed by law or rules and have no arbitrary discretion to disregard
them.[158] Here, while there is no provision of the Constitution, law, or
jurisprudence expressly allowing or disallowing Marcos' burial at the
LNMB, there is a rule, particularly AFP Regulations G 161-375, that is valid
and existing. It has the force and effect of law because it was duly issued
pursuant to the rule-making power of the President that was delegated to
his subordinate official. Hence, it is the sole authority in determining who
may or may not be buried at the LNMB.

To conclude, let it be emphasized that Supreme Court decisions do not have

to be popular as long as the Constitution and the law are followed. In
pursuit of the ideal "cold neutrality of an impartial judge," every member of
this august body must be guided by what Justice Isagani A. Cruz fittingly
stated in his Dissenting Opinion in Marcos v. Sec. Manglapus, thus:

I have no illusion that the stand I am taking will be met with paeans of
praise, considering that Marcos is perhaps the most detested man in the
entire history of our country. But we are not concerned here with popularity
and personalities. As a judge, I am not swayed by what Justice Cardozo
called the "hooting throng" that may make us see things through the prisms
of prejudice. I bear in mind that when I sit in judgment as a member of this
Court, I must cast all personal feelings aside.

The issue before us must be resolved with total objectivity, on the basis only
of the established, facts and the applicable law and not of wounds that still
fester and scars that have not healed. And not even of fear, for fear is a

214 | P a g e
phantom. That phantom did not rise when the people stood fast at EDSA –
against the threat of total massacre in defense at last of their freedom. [159]

Never has a burial stirred so much emotion, rancor and animosity as this
case, drawing the Court in its vortex. We could only do so much, however,
deciding the issues in a manner within our competence and otherwise
holding back on getting embroiled in politically and emotionally charged
controversies, matters better left for other government officials and
agencies, the people, and history, eventually, to judge.

Ever mindful that the Court cannot and should not be the ultimate judge of
all questions that confront the country, We must ever remain cognizant of
the boundaries of our role as final arbiters on questions of law in a carefully
wrought structure of government. If we are to do our job well, we must
know the limits of our powers and the appropriate yardsticks for our
decision-making authority. Overextending ourselves is more likely to be
counterproductive, eventually compromising our ability to discharge our
responsibilities effectively.

Just like the subject matter of this case, the issues must come to an end and
be interred. A man's place in history is for others to decide, not the Court's.

WHEREFORE, the motions for reconsideration, as well as the

motion/petition to exhume Marcos' remains at the Libingan ng mga
Bayani, are DENIED WITH FINALITY. The petitions for indirect
contempt in GR. No. 228186 and GR. No. 228245 are DISMISSED for
lack of merit.

SO ORDERED.

215 | P a g e
PEDRO LUKANG, Petitioner,
vs.
PAGBILAO DEVELOPMENT CORPORATION and EDUARDO T. RODRIGUEZ, Respondents.

DECISION

MENDOZA, J.:

This petition for review under Rule 45 of the Rules of Court assails the October 21, 2010
Decision  and the January 19, 2011 Resolution  of the Court of Appeals (CA) in CA-G.R. SP No.
1 2

108809, which nullified and set aside the May 13, 2008 Order  of the Regional Trial Court (RTCJ.
3

Branch 53, Lucena City, granting the petitioner's application for a writ of preliminary injunction.

The Facts:

The patriarch of the family, Arsenio Lukang (Arsenio), and Mercedes Dee (Mercedes) lived as
husband and wife in Calamba, Laguna, from 1922 to 1934 and begot three (3) children, namely,
Domingo, Rosalina and Olympia.

In 1935, he started cohabiting with Leoncia Martinez (Leoncia), with whom he had ten (10) children,
namely, Elpidio, Socorro, Manuel, Pedro, Teresita, Simeon, Eugenio, Hilaria, Concepcion, and
Carlos. During their cohabitation in Lucena, Quezon, they acquired several real properties located in
Pagbilao, Quezon, to wit:

(a) Transfer Certificate of Title (TCT) Nos. T-44547  with an area of 257,967 square meters;
4

(b) TCT No. T-44548  with an area of 40,000 square meters;

5

(c) TCT No. T-44549  with an area of 5.0078 hectares; and

6

(d) TCT No. T-44550  consisting of 5.0803 hectares.

7

The said properties were then registered in the name of "ARSENIO LUKANG, married to Mercedes
Dee, 1/2 share and Leoncia Martinez, single, 1/2 share."

Arsenio and Leoncia later acquired four (4) more parcels of land covered by TCT No. T-103094,
TCT No. T- 101425, TCT No. T-125349, and TCT No. T-125348. It was allegedly agreed that the
said properties should be registered in the name of Simeon, one of their children, in trust for the
other heirs and should be owned in common by their family.

When Arsenio died in 1976, his 13 children and Mercedes, executed the Extrajudicial Settlement of
Estate,  in which they agreed to adjudicate and transfer among themselves the rights, interest and
8

ownership of the four (4) parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-
44550. There was, however, no agreement to partition the properties as they remained common to
all the heirs.

Years later, after the execution of the Extrajudicial Settlement of Estate, Mercedes, together with her
three (3) children, Rosalina, Domingo, and Olympia, executed another document, denominated as
Pagbabahaging Labas sa Hukuman Na May Pagtalikod sa Karapatan,  dated December 19, 1987,
9

wherein the parties declared that they were the only heirs of Arsenio and partitioned the half portion

216 | P a g e
of the four (4) parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-44550
among themselves, with Mercedes waiving her supposed share in favor of her three (3) children.

In 1988, Simeon, alleging that the certificates of title of the properties covered by TCT Nos. T-
103094, T-101425, T-125349, and T-125348 were lost, filed a petition for the issuance of the
owner’s duplicate copy before the RTC, Branch 57, Lucena City. As a result, new owner’s duplicate
copies of the allegedly lost titles were issued in his favor. Thereafter, Simeon, in a deed of donation,
transferred the said properties in favor of his children, Benedict, Heile and Madeleine. Consequently,
TCT Nos. T-103094, T-125348 and T-125349 were cancelled, and TCT No. T-241034 was issued in
the name of Benedict; TCT No. 241035 in the name of Heile; and TCT No. 241036 in the name of
Madeleine.  Furthermore, Simeon purportedly executed the Bilihang Lampasan and Pagbibilihang
10

Lubusan, where he sold the land covered by TCT No. 101425 in favor of Mercedes, Rosalina,
Leoncia, and Elpidio.

In the meantime, on February 15, 1989, Mercedes, through Rosalinda, filed the Petition for the
Issuance of the Owner’s Duplicate of TCT Nos. T-44547, T-44548, T-44549 and T-44550  before the
11

RTC, Branch 58, Lucena City. The RTC, in its Order,  dated March 27, 1989, granted the petition
12

and new titles were issued in favor of Mercedes. Unknown to Leoncia, Rosalina caused the
segregation of the one-half portion of the said properties in her (Leoncia’s) favor and the division of
the remaining half among her and her siblings, Domingo and Olympia. Hence, TCT Nos. T-44547, T-
44548, T-44549, and T-44550 were cancelled and new titles were issued: TCT Nos. T-247219,  T- 13

247221,  T-247223,  and T-247225  in the names of Rosalina, Domingo and Olympia, while TCT
14 15 16

Nos. T-247220,  T-247222,  T-247224,  and T-247226  were registered in the name of Leoncia.
17 18 19 20

On September 26, 1990, Leoncia and her children, claiming that the titles of TCT Nos. T-44547, T-
44548, T-44549, and T-44550 were not lost but in her (Leoncia’s) possession, filed a complaint  for
21

annulment of extrajudicial partition, affidavit of segregation and annulment of the new certificates of
title, which was docketed as Civil Case No. 90-124. The said case was consolidated with Civil Case
No. 89-79, a case for recovery of four (4) owner’s duplicate copy of TCTs filed by Simeon against his
brother Pedro. The cases were raffled to RTC, Branch 53, Lucena City.

Subsequently, Leoncia, through Pedro, registered her adverse claim on February 3, 1989 on TCT
Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T-242427 as Entry No. 530545. He
further caused the annotation of a notice of lis pendens on TCT No. T-247221 as Entry No. 556192
on October 1, 1990, and on TCT Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T-
242427 as Entry No. 538916 on November 6, 1989.

In 1993, while Civil Case No. 89-79 and Civil Case No. 90-124 were still pending, respondent
Pagbilao Development Corporation (PDC) purchased from Simeon, Mercedes and Rosalina the six
(6) properties which were the subject of the two cases. Thus, TCT Nos. T-241034, T-242429, T-
241036, T-241035, T-247221, and T-242427 were cancelled and new titles, TCT Nos. T-282100,  T- 22

282101,  T-282102,  T-282103,  T-282104,  and T-282105  were issued in favor of PDC.
23 24 25 26 27

Accordingly, the annotations were carried over to PDC’s titles.

When Pedro and the other heirs learned of the sale of the subject properties to PDC, they filed a
motion to require Simeon and Rosalina to explain why they sold the properties without permission
from the RTC.  On April 23, 2008, they also filed an application for a writ of preliminary injunction
28

with ex-parte prayer for temporary restraining order (TRO).  They alleged that they were in actual
29

and physical possession of the subject properties; and that PDC entered into the said premises,
destroyed some structures therein and started to construct improvements on the properties without
their consent.

217 | P a g e
In its Order, dated April 23, 2008, the RTC  granted the issuance of the TRO effective for a period of
30

twenty (20) days.

On May 13, 2008, after due hearing, the RTC issued the Order  granting the application for writ of
31

preliminary injunction by which it restrained PDC from wresting possession of the subject properties
and ordering the movant, Pedro, to file a bond.

PDC filed a motion for reconsideration but it was denied in the RTC Order,  dated March 18, 2009.
32

On May 29, 2009, Pedro posted a bond in the amount of One Million Pesos (₱1,000,000.000). 33

PDC filed a petition for certiorari before the CA assailing the issuance of the writ of preliminary
injunction. The CA, in its Decision, dated October 21, 2010, granted the petition and set aside the
May 13, 2008 and March 18, 2009 Orders of the RTC. The CA explained that Pedro’s right over the
said properties was not clear as it was contingent on the outcome or result of the cases pending
before the RTC; that it was not a present right but a contingent or future right which was not covered
by injunction; and that there was no paramount necessity because there would be no great and
irreparable injury. Moreover, PDC, as the registered owner of the said properties, had the right to
enjoy the same as provided under Articles 428 and 429 of the Civil Code.

Pedro filed a motion for reconsideration but it was denied in the CA Resolution, dated January 19,
2011. Hence, this petition, anchored on the following

ISSUES

THE COURT OF APPEALS ERRED IN CONSISTENTLY TURNING AWAY FROM THE

ISSUE OF RESPONDENT PAGBILAO’S STATUS AS A TRANSFEREE PENDENTE LITE
WHEN THAT IS THE MAIN ISSUE IN THE FIRST PLACE

II

THE COURT OF APPEALS ERRED IN RULING THAT PAGBILAO AS REGISTERED

OWNER OF THE SUBJECT PROPERTIES HAVE THE RIGHT TO ENJOY AND EXCLUDE
OTHER PERSONS FROM THE ENJOYMENT THEREOF

III

THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT PRE-JUDGED
THE MAIN CASE AND SHIFTED THE BURDEN OF PROOF ON THE HEIRS OF SIMEON
LUKANG

IV

THE COURT OF APPEALS ERRED IN RULING THAT NON-ISSUANCE OF THE

INJUNCTIVE RELIEF IS NOT OF PARAMOUNT NECESSITY NOR WILL IT CAUSE
GREAT AND IRREPARABLE INJURY TO PEDRO LUKANG

218 | P a g e
 THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT COMMITTED
GRAVE ABUSE OF DISCRETION IN NOT FIXING THE BOND.

Synthesized, the issues boil down to the question of whether or not the RTC committed grave abuse
of discretion when it issued the May 13, 2008 Order granting the writ of preliminary injunction.

A writ of preliminary injunction is a provisional remedy which is adjunct to a main suit, as well as a
preservative remedy issued to maintain the status quo of the things subject of the action or the
relations between the parties during the pendency of the suit.  The purpose of injunction is to
34

prevent threatened or continuous irremediable injury to the parties before their claims can be
thoroughly studied and educated. Its sole aim is to preserve the status quo until the merits of the
case are fully heard.  Under Section 3, Rule 58 of the Rules of Court, an application for a writ of
35

preliminary injunction may be granted if the following grounds are established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained of, or in
requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

Thus, a writ of preliminary injunction may be issued upon the concurrence of the following essential
requisites, to wit: (a) the invasion of right sought to be protected is material and substantial; (b) the
right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount
necessity for the writ to prevent serious damage.  While a clear showing of the right is necessary, its
36

existence need not be conclusively established. Hence, to be entitled to the writ, it is sufficient that
the complainant shows that he has an ostensible right to the final relief prayed for in his complaint. 37

The well-entrenched rule is that the grant or denial of the writ of preliminary injunction rests upon the
sound discretion of the court. The trial court is given a wide latitude in this regard. Thus, in the
absence of a manifest abuse, such discretion must not be interfered with.  "Grave abuse of
38

discretion in the issuance of writs of preliminary injunction implies a capricious and whimsical
exercise of judgment that is equivalent to lack of jurisdiction, or where the power is exercised in an
arbitrary or despotic manner by reason of passion, prejudice or personal aversion amounting to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in
contemplation of law." 39

In the present case, the Court finds the RTC grant of injunction to be in order.  The pertinent parts of
1âwphi1

its order read:

It is to be emphasized that the deeds of sale between the vendors of the six parcels of land and the
Pagbilao Development Corporation were executed on June 1, 1993. The Affidavit of Adverse Claim
of Leoncia Martinez Vda. De Lukang and the Notice of Lis Pendens of Pedro Lukang over the six
properties were all inscribed on February 3, 1989.

219 | P a g e
There is no question, therefore, that when the Pagbilao Development Corporation bought the
properties from the vendors, it had full knowledge that there were questions involving ownership of
the parcels of land it bought.

Likewise there is no question that Pagbilao Development Corporation did not take any step to have
the annotation or encumbrance in each title cancelled. [Emphases supplied]

The annotation of an adverse claim and notice of lis pendens over the subject properties is a notice
to third persons that there is a controversy over the ownership of the land and serves to preserve
and protect the right of the adverse claimants during the pendency of the controversy.  The principle
40

of filing a notice of lis pendens is based on public policy and necessity, the purpose of which is to
keep the properties in litigation within the power of the court until the litigation is terminated in order
to prevent the defeat of the judgment by subsequent alienation; and in order to bind a purchaser,
bona fide or otherwise, to the judgment that the court would subsequently promulgate. It serves as
an announcement to the whole world that a particular real property is in litigation and as a warning
that those who acquire an interest in the property do so at their own risk -- they gamble on the result
of the litigation over it.
41

Here, it must be noted that the annotations of adverse claim and lis pendens have been inscribed in
the certificates of titles on the following dates February 3, 1989, November 6, 1989 and October 1,
1990, more than three (3) years before PDC bought the subject properties in 1993. It would have
been different if the adverse claims and lis pendens were not annotated in the titles. With PDC
having been officially aware of them, there can be no grave abuse of discretion that can be attributed
to the RTC for issuing the writ of preliminary injunction. There is no question that when PDC
purchased the property, the petitioner and other intervenors were in actual possession of the
property and their claims adverse to its predecessors-in-interest were annotated in the very titles of
the properties. In fact, these annotations were carried over to PDC’s title. PDC cannot invoke its
being the registered owner to dispossess the present possessors for, precisely, when it brought the
properties, it was charged with the knowledge that the ownership and sale of the subject properties
by its predecessors-in-interest have been questioned by their co-heirs. Inevitably, PDC is deemed to
have obtained the properties subject to the outcome of the litigation among the heirs of Arsenio.

During the hearing, Pedro and the other heirs were able to convince the RTC that they had a right
over the properties which should be protected while being litigated. Convinced, the RTC made a
preliminary determination that their right should be protected by a writ of preliminary injunction. Their
claimed ownership and actual possession were then being violated by PDC which had started
entering the premises and preparing the property for the construction of a power plant for liquefied
natural gas. Unless legally stopped, such act would indeed cause irreparable damage to the
petitioner and other claimants. As claimed co-owners, the petitioner and the other heirs have the
right to remain in possession of the subject properties pendente lite. The legal or practical remedy of
PDC, who gambled its lot in purchasing the properties despite the annotations, is to await the final
outcome of the cases or to amicably settle its problems with all the co-owners, co-heirs or claimants.

With regard to the issue of the injunctive bond, the Court has time and again ruled that the posting of
the bond is a condition sine qua non before a writ of preliminary injunction may issue.  Its purpose is
42

to secure the person enjoined against any damage that he may sustain in case the court should
finally decide that the applicant was not entitled thereto.  The rule, does not mean, however, that the
43

injunction maybe disregarded since it becomes effective only after the bond is actually filed in
court.  In fact, in the case of Consolidated Workers Union v. Court of Industrial Relations,  the Court
44 45

declared that it was erroneous for the labor court not to require the party to file a bond. Yet, the
Court did not annul the writ of injunction but instead ordered the said court to determine the
appropriate amount of bond to be posted by the party.

220 | P a g e
In fine, it is erroneous for the CA to rule that the RTC committed grave abuse of discretion simply
because it failed to fix the amount of the bond. This error caused "no substantial prejudice" that
would warrant the quashal of the writ of injunction.  As a matter of fact, Pedro posted a bond in the
46

amount of One Million Pesos (₱1,000,000.00), the sufficiency or insufficiency of which was never
questioned by PDC before the RTC.

Hence, the Court will not discuss the sufficiency of the bond not only because the issue was not
raised before the RTC but also it involves a question of fact.

WHEREFORE, the petition is GRANTED. The assailed October 21, 2010 Decision and the January
19, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 108809 are hereby REVERSED and
SET ASIDE. The May 13, 2008 Order of the Regional Trial Court, Branch 53, Lucena City, in Civil
Case No. 89-79 and Civil Case No. 90-124 ordering the issuance of a Writ of Preliminary Injunction,
is hereby ordered REINSTATED.

SO ORDERED.

221 | P a g e
G.R. No. 167238               March 25, 2009

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.
SPOUSES JESUS and ANACORITA DOYON, Respondents.

DECISION

CORONA, J.:

This petition1 seeks to the set aside the November 23, 2004 decision2 and February 18, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 74660.

In the early 1990s, respondent spouses Jesus and Anacorita Doyon obtained several loans
amounting to ₱10 million4 from petitioner Development Bank of the Philippines (DBP). As security for
the loans, respondents mortgaged their real estate properties as well as the motor vehicles of JD
Bus Lines.

Due to their inability to fully pay their obligations upon maturity, 5 respondents requested petitioner to
restructure their past due loans.6 Petitioner agreed. Hence, respondents signed three promissory
notes on June 29, 1994.7

Nonetheless, respondents still failed to pay the quarterly installments on the promissory notes. Thus,
petitioner demanded the payment of the total value of their loans from respondents. 8 Respondents,
however, ignored petitioner and adamantly refused to pay their loans.

Consequently, petitioner filed an application for extrajudicial foreclosure of real estate mortgages in
the Regional Trial Court (RTC) of Ormoc City in 1995. To forestall the foreclosure proceedings,
respondents immediately filed an action for their nullification in the RTC of Ormoc City, Branch 35
claiming that they had already paid the principal amount of their loans (or ₱10 million) to petitioner.
This was docketed as Civil Case No. 3314-O.

For three years, Civil Case No. 3314-O was not acted upon by the RTC.

In 1998, petitioner withdrew the application for extrajudicial foreclosure and thereafter moved for the
dismissal of Civil Case No. 3314-O. The RTC granted the motion in an order dated March 2,
1998.9 It held:

In today’s hearing, which is for the reception of evidence for [petitioner], [it] informed the Court about
its withdrawal of the [application] for extrajudicial foreclosure of real estate made subject of the
present case. In view of the withdrawal, [petitioner] moved for the dismissal of the case considering
that the action would be rendered moot and academic.

When [respondents were] made to comment, they interposed no objection to the motion to dismiss.

By agreement therefore between the parties, this case is considered DISMISSED with prejudice.

Weeks later, petitioner demanded from respondents the payment of their outstanding obligations
which had by then ballooned to more than ₱20 million. Again, respondents ignored petitioner.

222 | P a g e
Petitioner filed an application for extrajudicial foreclosure of respondents’ real and chattel mortgages
with the DBP special sheriff in Makati10 and subsequently took constructive possession of the
foreclosed properties.11 It posted guards at the perimeter of respondents’ property in Barangay
Cabulihan, Ormoc City (Cabulihan property) where the foreclosed motor vehicles of JD Bus Lines
were parked.12 Subsequently, the DBP special sheriff issued notices of sale at public auction of the
foreclosed properties.13

Meanwhile, respondents filed a complaint for damages 14 against petitioner and the DBP special
sheriff in the RTC of Ormoc City, Branch 35. According to respondents, by withdrawing the
application for extrajudicial foreclosure and moving for the dismissal of Civil Case No. 3314-O,
petitioner led them to believe that it would no longer seek the satisfaction of its claims. Petitioner
therefore acted contrary to Article 19 of the Civil Code15 when it foreclosed on the real and chattel
mortgages anew.

Furthermore, respondents claimed that the provision in the mortgage contracts 16 allowing petitioner
as mortgagee to take constructive possession of the mortgaged properties upon respondents’
default was void. The provision allegedly constituted a pactum commissorium17 since it permitted
petitioner to appropriate the mortgaged properties.

Lastly, respondents assailed the validity of the public auctions conducted by the DBP special sheriff.
The September 9, 1998 notices of sale stated that the foreclosed real properties would be sold at
public auction on "September 16, 1998 at 10:00 a.m. or soon thereafter" 18 while the foreclosed motor
vehicles would be sold on "September 16, 1998 at 2:00 p.m. or soon thereafter." 19 Section 4 of Act
3135,20 however, requires that public auctions must take place from 9 a.m. until 4 p.m. or, allegedly,
for seven continuous hours.

Petitioner, in its answer, pointed out that despite the restructuring, respondents refused to pay the
amortizations on the June 29, 2004 promissory notes. Moreover, the filing of Civil Case No. 3314-O
and the delay in its resolution prevented petitioner from collecting on the said notes from
respondents. It withdrew the application in the RTC and moved for the dismissal of Civil Case No.
3314-O only for the purpose of availing of a more efficient legal remedy, that is, foreclosure through
a special sheriff, as authorized by its charter.21

In a decision dated January 25, 2002, 22 the RTC found that, by withdrawing its application for
extrajudicial foreclosure and moving for the dismissal of Civil Case No. 3314-O, petitioner led
respondents to believe that their loans had been extinguished. Thus, petitioner acted in bad faith
when it foreclosed on the real and chattel mortgages anew. The dispositive portion of the decision
read:

Wherefore, after due consideration of all the foregoing, judgment is hereby rendered in favor of
[respondents] and against [petitioner], ordering as follows:

1. [petitioner] to immediately stop the presence of its security guards in the compound or
premises of the plaintiffs at Barangay Cabulihan, Ormoc City, and to vacate them from said
premises;

2. [petitioner] to pay actual damages to [respondents] in the total amount of ₱16,000 per day
for the four buses, or a total of ₱480,000 per month for these buses starting from April 27,
1998 until the time the buses shall have been allowed to leave the compound of
[respondents] or until [petitioner] shall vacate the said premises, and ₱200,000 as
compensatory damages for the injury to [respondents'] business standing;

223 | P a g e
 3. [petitioner] to pay ₱1,000,000 as exemplary damages;

4. [petitioner and the DBP special sheriff] jointly and severally to pay the plaintiffs the sum of
₱2,000,000 as moral damages, the sum of ₱50,000 as attorney's fees, the sum of ₱10,000
as litigation expenses and costs of the suit.

Aggrieved, petitioner appealed to the CA. 23

In a decision dated November 23, 2004, the CA affirmed the RTC decision with modification of the
liability for damages. Because the DBP special sheriff merely performed his ministerial duty (when
he foreclosed on the real and chattel mortgages and issued notices of sale in public auction of the
foreclosed properties), petitioner alone was liable.

Petitioner moved for reconsideration but it was denied. Hence, this petition.

Petitioner basically asserts that it did not act in bad faith when it foreclosed on respondents’ real and
chattel mortgages anew. Because respondents’ loans were past due, it had the right to satisfy its
credit by foreclosing on the mortgages.

We grant the petition.

This Court is not a trier of facts and, as a rule, it only entertains questions of law in a petition for
review on certiorari. This rule, however, admits of exceptions such as when the assailed decision is
based on a misapprehension of facts.24

In this instance, the RTC and the CA both found that petitioner acted with bad faith when it
foreclosed on the real and chattel mortgages. We disagree.

What is due to a person is determined by the circumstances of each particular case. 25 Article 19 of
the Civil Code provides:

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due and observe honesty and good faith.

For an action for damages under this provision to prosper, the complainant must prove that:

(a) defendant has a legal right or duty;

(b) he exercised his right or performed his duty with bad faith and

(c) complainant was prejudiced or injured as a result of the said exercise or performance by
defendant.

On the first requisite, we find that petitioner had the legal right to foreclose on the real and chattel
mortgages.

Since respondents neither assailed the due execution of the June 29, 1994 promissory notes nor
presented proof of payment thereof, their obligation remained outstanding. Upon default, by prior
mutual agreement, petitioner had the right to foreclose on the real and chattel mortgages securing
their loans.

224 | P a g e
The June 29, 1994 promissory notes uniformly stated that failure to pay an installment (or interest)
on the due date was an event of default. 26 Respondents were therefore in default when they failed to
pay the quarterly amortizations on the designated due dates. 1avvphi1 .zw+

When the principal obligation becomes due and the debtor fails to perform his obligation, the creditor
may foreclose on the mortgage27 for the purpose of alienating the (mortgaged) property to satisfy his
credit.28

Regarding the second requisite, bad faith imports a dishonest purpose or some moral obliquity or
conscious doing of a wrong that partakes of the nature of fraud. 29

We note that the RTC of Ormoc City (Judge Fortunito L. Madrona) "sat" on Civil Case No. 3314-O
for three long years. This inordinate delay prejudiced petitioner. Inasmuch as petitioner was in the
business of lending out money it borrowed from the public, sound banking practice called for the
exercise of a more efficient legal remedy against a defaulting debtor like respondent. 30 Thus,
petitioner could not be faulted for resorting to foreclosure through a special sheriff. Such procedure
was, after all, the more efficient method of enforcing petitioner’s rights as mortgagee under its
charter.31

Moreover, the March 2, 1998 order of the RTC (quoted above) merely stated that the withdrawal of
the application for extrajudicial foreclosure in the RTC rendered Civil Case No. 3314-O moot and
academic. Nothing in the said order stated, or even hinted, that respondents’ obligation to petitioner
had in fact been extinguished. Thus, there was nothing on the part of petitioner even remotely
showing that it led respondents to believe that it had waived its claims.

Lastly, inasmuch as petitioner demanded payment from them right after the dismissal of Civil Case
No. 3314-O, respondents could not have reasonably presumed that the bank had waived its claims
against them. Furthermore, the fact that a demand for payment was made negated bad faith on the
part of petitioner. Despite giving respondents the opportunity to pay their long overdue obligations
and avoid foreclosure, respondents still refused to pay. Since respondents did not have a cause of
action against petitioner, the RTC and CA erred in granting damages to them.

A stipulation allowing the mortgagee to take actual or constructive possession of a mortgaged

property upon foreclosure is valid. In Agricultural and Industrial Bank v. Tambunting, 32 we explained:

A stipulation … authorizing the mortgagee, for the purpose stated therein specified, to take
possession of the mortgaged premises upon the foreclosure of a mortgage is not repugnant [to
either Article 2088 or Article 2137]. On the contrary, such a stipulation is in consonance or
analogous to the provisions of Article [2132], et seq. of the Civil Code regarding antichresis and the
provision of the Rules of Court regarding the appointment of a receiver as a convenient and feasible
means of preserving and administering the property in litigation. 33

The real estate and chattel mortgage contracts34 uniformly provided that petitioner could take
possession of the foreclosed properties upon the failure of respondents to pay even one
amortization. Thus, respondents’ refusal to pay their obligations gave rise to petitioner’s right to take
constructive possession of the foreclosed motor vehicles.

In Philippine National Bank v. Cabatingan, 35 we held that a sale at public auction held at any time
between 9:00 a.m. and 4:00 p.m. of a particular day, regardless of duration, was valid. Since the
sale at public auction of the foreclosed real properties and chattels was conducted between 10:00
a.m. and 11:00 a.m. and between 2:00 p.m. and 3:30 p.m., respectively, the auctions were valid.

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WHEREFORE, the petition is hereby GRANTED. The November 23, 2004 decision and February
18, 2005 resolution of the Court of Appeals in CA-G.R. CV 74660 affirming the January 25, 2002
decision of the Regional Trial Court of Ormoc City, Branch 35 in Civil Case No. 3592-0 are SET
ASIDE. New judgment is hereby entered dismissing Civil Case No. 3592-0 for lack of cause of
action.

No pronouncement as to costs.

SO ORDERED.

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G.R. No. 182963               June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,

vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the April 30, 2007 Decision 1 and May 19, 2008
Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed the August 11, 2005
Decision3 of the Regional Trial Court, Branch 33, Manila City.

On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory
Note with Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for
receiving the amount of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th day of each
succeeding month until fully paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport;
and an interest of 6% per month shall be imposed for failure to pay each installment on or before the
stated due date.4

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note
with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002,
likewise assigned the same to respondent BPI Family Savings Bank, Inc.5

For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent,
through counsel, sent to petitioners a demand letter dated August 29, 2002, declaring the entire
obligation as due and demandable and requiring to pay Php576,664.04, or surrender the mortgaged
vehicle immediately upon receiving the letter.6 As the demand was left unheeded, respondent filed
on October 4, 2002 an action for Replevin and Damages before the Manila Regional Trial Court
(RTC).

A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits
ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered
petitioners to jointly and severally pay the amount of Php576,664.04 plus interest at the rate of 72%
per annum from August 20, 2002 until fully paid, and the costs of suit.

Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower court’s
decision and, subsequently, denied the motion for reconsideration; hence, this petition.

Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed
of Assignment executed in its favor did not specifically mention ABN AMRO’s account receivable
from petitioners; (2) petitioners cannot be considered to have defaulted in payment for lack of
competent proof that they received the demand letter; and (3) respondent’s remedy of resorting to
both actions of replevin and collection of sum of money is contrary to the provision of Article 1484 9 of
the Civil Code and the Elisco Tool Manufacturing Corporation v. Court of Appeals 10 ruling.

The contentions are untenable.

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With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of
Assignment had already been considered by the trial court and the CA. Likewise, it is an issue of fact
that is not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt
or difference arises as to the truth or falsehood of alleged facts, or when the query invites calibration
of the whole evidence, considering mainly the credibility of witnesses, existence and relevancy of
specific surrounding circumstances, their relation to each other and to the whole, and the
probabilities of the situation.11 Time and again, We stress that this Court is not a trier of facts and
generally does not weigh anew evidence which lower courts have passed upon.

As to the second issue, records bear that both verbal and written demands were in fact made by
respondent prior to the institution of the case against petitioners. 12 Even assuming, for argument’s
sake, that no demand letter was sent by respondent, there is really no need for it because petitioners
legally waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage,
which they voluntarily and knowingly signed in favor of respondent’s predecessor-in-interest. Said
contract expressly stipulates:

In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay
under this note and/or any other obligation which I/We or any of us may now or in the future owe to
the holder of this note or to any other party whether as principal or guarantor x x x then the entire
sum outstanding under this note shall, without prior notice or demand, immediately become due and
payable. (Emphasis and underscoring supplied)

A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the
Philippine Islands v. Court of Appeals,13 wherein We held:

The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the
obligor demands the fulfillment of the obligation from the obligee. However, the law expressly
provides that demand is not necessary under certain circumstances, and one of these
circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly
waived demand in the promissory notes, demand was unnecessary for them to be in default. 14

Further, the Court even ruled in Navarro v. Escobido 15 that prior demand is not a condition precedent
to an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court
that requires the applicant to make a demand on the possessor of the property before an action for a
writ of replevin could be filed.

Also, petitioners’ representation that they have not received a demand letter is completely
inconsequential as the mere act of sending it would suffice. Again, We look into the Promissory Note
with Chattel Mortgage, which provides:

All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or
notifications of any judicial or extrajudicial action shall be sent to the MORTGAGOR at the address
indicated on this promissory note with chattel mortgage or at the address that may hereafter be
given in writing by the MORTGAGOR to the MORTGAGEE or his/its assignee. The mere act of
sending any correspondence by mail or by personal delivery to the said address shall be valid and
effective notice to the mortgagor for all legal purposes and the fact that any communication is not
actually received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE
or that no person was found at the address given, or that the address is fictitious or cannot be
located shall not excuse or relieve the MORTGAGOR from the effects of such notice. 16 (Emphasis
and underscoring supplied)

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The Court cannot yield to petitioners’ denial in receiving respondent’s demand letter. To note, their
postal address evidently remained unchanged from the time they executed the Promissory Note with
Chattel Mortgage up to time the case was filed against them. Thus, the presumption that "a letter
duly directed and mailed was received in the regular course of the mail" 17 stands in the absence of
satisfactory proof to the contrary.

Petitioners cannot find succour from Ting v. Court of Appeals 18 simply because it pertained to
violation of Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof –
that is, proof beyond reasonable doubt – is required in view of the criminal nature of the case, We
found insufficient the mere presentation of a copy of the demand letter allegedly sent through
registered mail and its corresponding registry receipt as proof of receiving the notice of dishonor.

Perusing over the records, what is clear is that petitioners did not take advantage of all the
opportunities to present their evidence in the proceedings before the courts below. They miserably
failed to produce the original cash deposit slips proving payment of the monthly amortizations in
question. Not even a photocopy of the alleged proof of payment was appended to their Answer or
shown during the trial. Neither have they demonstrated any written requests to respondent to furnish
them with official receipts or a statement of account. Worse, petitioners were not able to make a
formal offer of evidence considering that they have not marked any documentary evidence during
the presentation of Deo Agner’s testimony.19

Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the
burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-
payment.20 When the creditor is in possession of the document of credit, proof of non-payment is not
needed for it is presumed.21 Respondent's possession of the Promissory Note with Chattel Mortgage
strongly buttresses its claim that the obligation has not been extinguished. As held in Bank of the
Philippine Islands v. Spouses Royeca:22

x x x The creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness
rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that
the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is unpaid. 23

Indeed, when the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such defense to the claim of the creditor. 24 The debtor has the burden of showing with legal certainty
that the obligation has been discharged by payment. 25

Lastly, there is no violation of Article 1484 of the Civil Code and the Court’s decision in Elisco Tool
Manufacturing Corporation v. Court of Appeals.26

In Elisco, petitioner's complaint contained the following prayer:

WHEREFORE, plaintiffs pray that judgment be rendered as follows:

ON THE FIRST CAUSE OF ACTION

Ordering defendant Rolando Lantan to pay the plaintiff the sum of ₱39,054.86 plus legal interest
from the date of demand until the whole obligation is fully paid;

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ON THE SECOND CAUSE OF ACTION

To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly
described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina
Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor
vehicle may be found, complete with accessories and equipment, and direct deliver thereof to
plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff's
possession over the same;

PRAYER COMMON TO ALL CAUSES OF ACTION

1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to
twenty-five percent (25%) of his outstanding obligation, for and as attorney's fees;

2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees
and other incidental expenses to be proved during the trial; and

3. Ordering defendants to pay the costs of suit.

Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable
under the premises.27

The Court therein ruled:

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the
exercise of the others. This limitation applies to contracts purporting to be leases of personal
property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the
lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in
this case by the filing by petitioner of the complaint for replevin to recover possession of movable
property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle
on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to
private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by
the Court of Appeals of a writ of execution.

Petitioner prayed that private respondents be made to pay the sum of ₱39,054.86, the amount that
they were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it
prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle "complete

with accessories and equipment." In the event the car could not be delivered to petitioner, it was
prayed that private respondent Rolando Lantan be made to pay petitioner the amount of ₱60,000.00,
the "estimated actual value" of the car, "plus accrued monthly rentals thereof with interests at the
rate of fourteen percent (14%) per annum until fully paid." This prayer of course cannot be granted,
even assuming that private respondents have defaulted in the payment of their obligation. This led
the trial court to say that petitioner wanted to eat its cake and have it too. 28

In contrast, respondent in this case prayed:

(a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ of Replevin
ordering the seizure of the motor vehicle above-described, complete with all its accessories
and equipments, together with the Registration Certificate thereof, and direct the delivery
thereof to plaintiff in accordance with law and after due hearing, to confirm the said seizure;

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 (b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to
render judgment in favor of plaintiff and against defendant(s) ordering them to pay to plaintiff,
jointly and severally, the sum of ₱576,664.04 plus interest and/or late payment charges
thereon at the rate of 72% per annum from August 20, 2002 until fully paid;

(c) In either case, to order defendant(s) to pay jointly and severally:

(1) the sum of ₱297,857.54 as attorney’s fees, liquidated damages, bonding fees and
other expenses incurred in the seizure of the said motor vehicle; and

(2) the costs of suit.

Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in
the premises.29

Compared with Elisco, the vehicle subject matter of this case was never recovered and delivered to
respondent despite the issuance of a writ of replevin. As there was no seizure that transpired, it
cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or
that respondent pursued, commenced or concluded its actual foreclosure. The trial court, therefore,
rightfully granted the alternative prayer for sum of money, which is equivalent to the remedy of
"exacting fulfillment of the obligation." Certainly, there is no double recovery or unjust enrichment 30 to
speak of.1âwphi1

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per month should be
equitably reduced to one percent (1%) per month or twelve percent (12%) per annum, to be
reckoned from May 16, 2002 until full payment and with the remaining outstanding balance of their
car loan as of May 15, 2002 as the base amount.

Settled is the principle which this Court has affirmed in a number of cases that stipulated interest
rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and
exorbitant.31 While Central Bank Circular No. 905-82, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of
maturity, nothing in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being contrary to
morals, if not against the law, it is as if there was no express contract on said interest rate; thus, the
interest rate may be reduced as reason and equity demand. 33

WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30,
2007 Decision and May 19, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 86021.
Petitioners spouses Deo Agner and Maricon Agner are ORDERED to pay, jointly and severally,
respondent BPI Family Savings Bank, Inc. ( 1) the remaining outstanding balance of their auto loan
obligation as of May 15, 2002 with interest at one percent ( 1 o/o) per month from May 16, 2002 until
fully paid; and (2) costs of suit.

SO ORDERED.

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G.R. No. 183018               August 3, 2011

ADVENT CAPITAL AND FINANCE CORPORATION, Petitioner,

vs.
ROLAND YOUNG, Respondent.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 28 December 2007 Decision2 and 15 May 2008 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 96266. The Court of Appeals set aside the 24 March 2006 and
5 July 2006 Orders4 of the Regional Trial Court of Makati City, Branch 147, and directed petitioner
Advent Capital and Finance Corporation to return the seized vehicle to respondent Roland Young.
The Court of Appeals denied the motion for reconsideration.

The Antecedents

The present controversy stemmed from a replevin suit instituted by petitioner Advent Capital and
Finance Corporation (Advent) against respondent Roland Young (Young) to recover the possession
of a 1996 Mercedes Benz E230 with plate number UMN-168, which is registered in Advent’s name. 5

Prior to the replevin case, or on 16 July 2001, Advent filed for corporate rehabilitation with the
Regional Trial Court of Makati City, Branch 142 (rehabilitation court). 6

On 27 August 2001, the rehabilitation court issued an Order (stay order) which states that "the
enforcement of all claims whether for money or otherwise, and whether such enforcement is by court
action or otherwise, against the petitioner (Advent), its guarantors and sureties not solidarily liable
with it, is stayed."7

On 5 November 2001, Young filed his Comment to the Petition for Rehabilitation, claiming, among
others, several employee benefits allegedly due him as Advent’s former president and chief
executive officer.

On 6 November 2002, the rehabilitation court approved the rehabilitation plan submitted by Advent.
Included in the inventory of Advent’s assets was the subject car which remained in Young’s
possession at the time.

Young’s obstinate refusal to return the subject car, after repeated demands, prompted Advent to file
the replevin case on 8 July 2003. The complaint, docketed as Civil Case No. 03-776, was raffled to
the Regional Trial Court of Makati City, Branch 147 (trial court).

After Advent’s posting of ₱3,000,000 replevin bond, which was double the value of the subject car at
the time, through Stronghold Insurance Company, Incorporated (Stronghold), the trial court issued a
Writ of Seizure8 directing the Sheriff to seize the subject car from Young. Upon receipt of the Writ of
Seizure, Young turned over the car to Advent,9 which delivered the same to the rehabilitation
receiver.10

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Thereafter, Young filed an Answer alleging that as a former employee of Advent, he had the option
to purchase the subject car at book value pursuant to the company car plan and to offset the value
of the car with the proceeds of his retirement pay and stock option plan. Young sought the (1)
execution of a deed of sale over the subject car; and (2) determination and payment of the net
amount due him as retirement benefits under the stock option plan.

Advent filed a Reply with a motion to dismiss Young’s counterclaim, alleging that the counterclaim
did not arise from or has no logical relationship with the issue of ownership of the subject car.

After issues have been joined, the parties entered into pre-trial on 2 April 2004, which resulted in the
issuance of a pre-trial order of even date reciting the facts and the issues to be resolved during the
trial.

On 28 April 2005, the trial court issued an Order dismissing the replevin case without prejudice for
Advent’s failure to prosecute. In the same order, the trial court dismissed Young’s counterclaim
against Advent for lack of jurisdiction. The order pertinently reads:

It appears that as of July 28, 2003, subject motor vehicle has been turned over to the plaintiff, thru its
authorized representative, and adknowledged by the parties’ respective counsels in separate
Manifestations filed. To date, no action had been taken by the plaintiff in the further prosecution of
this case. Accordingly, this case is ordered dismissed without prejudice on the ground of failure to
prosecute.

Anent plaintiff’s Motion to Dismiss defendant Young’s counterclaim for benefits under the retirement
and stock purchase plan, the Court rules as follows: The only issue in this case is who is entitled to
the possession of the subject motor vehicle. This issue may have a connection, but not a necessary
connection with defendant’s rights under the retirement plan and stock purchase plan as to be
considered a compulsory counterclaim.

xxx

Notably, defendant’s claim is basically one for benefits under and by virtue of his employment with
the plaintiff, and the subject vehicle is merely an incident in that claim. Said claim is properly
ventilated, as it is resolvable by, the Rehabilitation Court which has jurisdiction and has acquired
jurisdiction, to the exclusion of this Court. Accordingly, plaintiff’s Motion To Dismiss defendant
Young’s counterclaim is granted.11

On 10 June 2005, Young filed a motion for partial reconsideration of the dismissal order with respect
to his counterclaim.

On 8 July 2005, Young filed an omnibus motion, praying that Advent return the subject car and pay
him ₱1.2 million in damages "(f)or the improper and irregular seizure" of the subject car, to be
charged against the replevin bond posted by Advent through Stronghold.

On 24 March 2006, the trial court issued an Order denying Young’s motion for partial
reconsideration, viz:

In the instant case, defendant, in his counterclaim anchored her [sic] right of possession to the
subject vehicle on his alleged right to purchase the same under the company car plan. However,
considering that the Court has already declared that it no longer has jurisdiction to try defendant’s

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counterclaim as it is now part of the rehabilitation proceedings before the corporate court concerned,
the assertions in the Motion for Reconsiderations (sic) will no longer stand.

On the other hand, the plaintiff did not file a Motion for Reconsideration of the same Order,
dismissing the complaint for failure to prosecute, within the reglementary period. Hence, the same
has attained finality.

Defendant alleged that the dismissal of the case resulted in the dissolution of the writ. Nonetheless,
the Court deems it proper to suspend the resolution of the return of the subject vehicle. In this case,
the subject vehicle was turned over to plaintiff by virtue of a writ of replevin validly issued, the latter
having sufficiently shown that it is the absolute/registered owner thereof. This was not denied by the
defendant. Plaintiff’s ownership includes its right of possession. The case has been dismissed
without a decision on the merits having been rendered. Thus, to order the return of the vehicle to
one who is yet to prove his right of possession would not be proper.

Accordingly, the Motion for Partial Reconsideration is denied. 12

On 8 June 2006, Young filed a motion to resolve his omnibus motion.

In an Order dated 5 July 2006, the trial court denied the motion to resolve, to wit:

In the instant case, the Court suspended the resolution of the return of the vehicle to defendant
Roland Young. It should be noted that the writ of replevin was validly issued in favor of the plaintiff
and that it has sufficiently established ownership over the subject vehicle which includes its right to
possess. On the other hand, the case (Olympia International vs. Court of Appeals) cited by
defendant finds no application to this case, inasmuch as in the former the Court has not rendered
judgment affirming plaintiff’s (Olympia) right of possession on the property seized. Moreover, the
Court, in the Order dated April 28, 2005, has already denied defendant’s counterclaim upon which
he based his right of possession on the ground of lack of jurisdiction. Accordingly, the Court
reiterates its previous ruling that to order the return of the subject vehicle to defendant Young, who is
yet to prove his right of possession before the Rehabilitation Court would not be proper.

WHEREFORE, there being no new and substantial arguments raised, the Motion to Resolve is
denied.13

Young filed a petition for certiorari and mandamus with the Court of Appeals seeking to annul the
trial court’s Orders of 24 March 2006 and 5 July 2006.

The Court of Appeals’ Ruling

In his petition before the Court of Appeals, Young argued mainly that the trial court committed grave
abuse of discretion amounting to lack or excess of jurisdiction in (1) not directing the return of the
subject vehicle to him; (2) refusing to hold a hearing to determine the damages to be recovered
against the replevin bond; and (3) dismissing his counterclaim.

The Court of Appeals ruled in favor of Young and annulled the assailed rulings of the trial court. The
Court of Appeals held:

It is noteworthy that the case was dismissed by the court a quo for failure of Advent to prosecute the
same. Upon dismissal of the case, the writ of seizure issued as an incident of the main action (for
replevin) became functus officio and should have been recalled or lifted. Since there was no

234 | P a g e
adjudication on the merits of the case, the issue of who between Advent and petitioner has the better
right to possess the subject car was not determined. As such, the parties should be restored to their
status immediately before the institution of the case.

The Supreme Court’s ruling in Olympia International, Inc. vs. Court of Appeals (supra) squarely
applies to the present controversy, to wit:

"Indeed, logic and equity demand that the writ of replevin be cancelled. Being provisional and
ancillary in character, its existence and efficacy depended on the outcome of the case. The case
having been dismissed, so must the writ’s existence and efficacy be dissolved. To let the writ stand
even after the dismissal of the case would be adjudging Olympia as the prevailing party, when
precisely, no decision on the merits had been rendered. The case having been dismissed, it is as if
no case was filed at all and the parties must revert to their status before the litigation."

Indeed, as an eminent commentator on Remedial Law expounds:

"The plaintiff who obtains possession of the personal property by a writ of replevin does not acquire
absolute title thereto, nor does the defendant acquire such title by rebonding the property, as they
only hold the property subject to the final judgment in the action." (I Regalado, Remedial Law
Compendium, Eighth Revised Edition, p. 686)

Reversion of the parties to the status quo ante is the consequence ex proprio vigore of the dismissal
of the case. Thus, in Laureano vs. Court of Appeals (324 SCRA 414), it was held:

"(A)lthough the commencement of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same
position as though no action had been commenced at all."

By the same token, return of the subject car to petitioner pending rehabilitation of Advent does not
constitute enforcement of claims against it, much more adjudication on the merits of petitioner’s
counterclaim. In other words, an order for such return is not a violation of the stay order, which was
issued by the rehabilitation court on August 27, 2001. x x x

Corollarily, petitioner’s claim against the replevin bond has no connection at all with the rehabilitation
proceedings. The claim is not against the insolvent debtor (Advent) but against bondsman,
Stronghold. Such claim is expressly authorized by Sec. 10, Rule 60, in relation to Sec. 20, Rule 57,
id., x x x14

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The orders of the
Regional Trial Court dated March 24, 2006 and July 5, 2006 are ANNULLED and SET ASIDE in so
far as they suspended resolution of petitioner’s motion for, and/or disallowed, the return of the
subject car to petitioner. Accordingly, respondent Advent Capital and Finance Corporation is directed
to return the subject car to petitioner.

The Regional Trial Court of Makati City (Branch 147) is directed to conduct a hearing on, and
determine, petitioner’s claim for damages against the replevin bond posted by Stronghold Insurance
Co.

SO ORDERED.15

235 | P a g e
Advent filed a motion for reconsideration, which was denied by the Court of Appeals in a Resolution
dated 15 May 2008.

The Issue

The main issue in this case is whether the Court of Appeals committed reversible error in (1)
directing the return of the seized car to Young; and (2) ordering the trial court to set a hearing for the
determination of damages against the replevin bond.

The Court’s Ruling

The petition is partially meritorious.

On returning the seized vehicle to Young

We agree with the Court of Appeals in directing the trial court to return the seized car to Young since
this is the necessary consequence of the dismissal of the replevin case for failure to prosecute
without prejudice. Upon the dismissal of the replevin case for failure to prosecute, the writ of seizure,
which is merely ancillary in nature, became functus officio and should have been lifted. There was
no adjudication on the merits, which means that there was no determination of the issue who has the
better right to possess the subject car. Advent cannot therefore retain possession of the subject car
considering that it was not adjudged as the prevailing party entitled to the remedy of replevin.

Contrary to Advent’s view, Olympia International Inc. v. Court of Appeals 16 applies to this case. The
dismissal of the replevin case for failure to prosecute results in the restoration of the parties’ status
prior to litigation, as if no complaint was filed at all. To let the writ of seizure stand after the dismissal
of the complaint would be adjudging Advent as the prevailing party, when precisely no decision on
the merits had been rendered. Accordingly, the parties must be reverted to their status quo ante.
Since Young possessed the subject car before the filing of the replevin case, the same must be
returned to him, as if no complaint was filed at all.

Advent’s contention that returning the subject car to Young would constitute a violation of the stay
order issued by the rehabilitation court is untenable. As the Court of Appeals correctly concluded,
returning the seized vehicle to Young is not an enforcement of a claim against Advent which must be
suspended by virtue of the stay order issued by the rehabilitation court pursuant to Section 6 of the
Interim Rules on Corporate Rehabilitation (Interim Rules). 17 The issue in the replevin case is who has
better right to possession of the car, and it was Advent that claimed a better right in filing the replevin
case against Young. In defense, Young claimed a better right to possession of the car arising from
Advent’s car plan to its executives, which he asserts entitles him to offset the value of the car against
the proceeds of his retirement pay and stock option plan.

Young cannot collect a money "claim" against Advent within the contemplation of the Interim Rules.
The term "claim" has been construed to refer to debts or demands of a pecuniary nature, or the
assertion to have money paid by the company under rehabilitation to its creditors. 18 In the replevin
case, Young cannot demand that Advent pay him money because such payment, even if valid, has
been "stayed" by order of the rehabilitation court. However, in the replevin case, Young can raise
Advent’s car plan, coupled with his retirement pay and stock option plan, as giving him a better right
to possession of the car. To repeat, Young is entitled to recover the subject car as a necessary
consequence of the dismissal of the replevin case for failure to prosecute without prejudice.

On the damages against the replevin bond

236 | P a g e
Section 10, Rule 60 of the Rules of Court19 governs claims for damages on account of improper or
irregular seizure in replevin cases. It provides that in replevin cases, as in receivership and injunction
cases, the damages to be awarded upon the bond "shall be claimed, ascertained, and granted" in
accordance with Section 20 of Rule 57 which reads:

Sec. 20. Claim for damages on account of improper, irregular or excessive attachment. - An

application for damages on account of improper, irregular or excessive attachment must be filed
before the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper hearing and
shall be included in the judgment on the main case. e

If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application
in the appellate court with notice to the party in whose favor the attachment was issued or his surety
or sureties, before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching
obligee not exempt from execution should the bond or deposit given by the latter be insufficient or
fail to fully satisfy the award.

The above provision essentially allows the application to be filed at any time before the judgment
becomes executory.20 It should be filed in the same case that is the main action, 21 and with the court
having jurisdiction over the case at the time of the application. 22

In this case, there was no application for damages against Stronghold resulting from the issuance of
the writ of seizure before the finality of the dismissal of the complaint for failure to prosecute. It
appears that Young filed his omnibus motion claiming damages against Stronghold after the
dismissal order issued by the trial court on 28 April 2005 had attained finality. While Young filed a
motion for partial reconsideration on 10 June 2005, it only concerned the dismissal of his
counterclaim, without any claim for damages against the replevin bond. It was only on 8 July 2005
that Young filed an omnibus motion seeking damages against the replevin bond, after the dismissal
order had already become final for Advent’s non-appeal of such order. In fact, in his omnibus motion,
Young stressed the finality of the dismissal order. 23 Thus, Young is barred from claiming damages
against the replevin bond.

In Jao v. Royal Financing Corporation,24 the Court held that defendant therein was precluded from
claiming damages against the surety bond since defendant failed to file the application for damages
before the termination of the case, thus:

The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had become final and
executory before the defendant-appellee corporation filed its motion for judgment on the bond on
September 7, 1959. In the order of the trial court, dismissing the complaint, there appears no
pronouncement whatsoever against the surety bond. The appellee-corporation failed to file its proper
application for damages prior to the termination of the case against it. It is barred to do so now. The
prevailing party, if such would be the proper term for the appellee-corporation, having failed to file its
application for damages against the bond prior to the entry of final judgment, the bondsman-
appellant is relieved of further liability thereunder.

237 | P a g e
Since Young is time-barred from claiming damages against the replevin bond, the dismissal order
having attained finality after the application for damages, the Court of Appeals erred in ordering the
trial court to set a hearing for the determination of damages against the replevin bond.

WHEREFORE, the Court GRANTS the petition IN PART. The Court SETS ASIDE the portion in the
assailed decision of the Court of Appeals in CA-G.R. SP No. 96266 ordering the trial court to set a
hearing for the determination of damages against the replevin bond.

SO ORDERED.

238 | P a g e
 THIRD DIVISION

[G.R. No. 137705. August 22, 2000]

SERGS PRODUCTS, INC., and SERGIO T.

GOQUIOLAY, Petitioners, vs. PCI LEASING AND
FINANCE, INC., Respondent.

DECISION

PANGANIBAN, J.: 
chanrobles virtual law library

After agreeing to a contract stipulating that a real or

immovable property be considered as personal or movable, a
party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin
obtained by the other contracting party.

The Case  chanrobles virtual law library

Before us is a Petition for Review on Certiorari assailing the

January 6, 1999 Decision1 of the Court of Appeals (CA)[2 in
CA-GR SP No. 47332 and its February 26, 1999
Resolution[3 denying reconsideration. The decretal portion of
the CA Decision reads as follows:  chanrobles virtual law library

WHEREFORE, premises considered, the assailed Order dated

February 18, 1998 and Resolution dated March 31, 1998 in
Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of
preliminary injunction issued on June 15, 1998 is
hereby LIFTED.4  chanrobles virtual law library

In its February 18, 1998 Order,5 the Regional Trial Court

(RTC) of Quezon City (Branch 218)[6 issued a Writ of Seizure.
[7 The March 18, 1998 Resolution [8 denied petitioners Motion

for Special Protective Order, praying that the deputy sheriff

be enjoined from seizing immobilized or other real properties
in (petitioners) factory in Cainta, Rizal and to return to their

239 | P a g e
original place whatever immobilized machineries or
equipments he may have removed.[9

The Facts 
chanrobles virtual law library

The undisputed facts are summarized by the Court of

Appeals as follows:10  chanrobles virtual law library

On February 13, 1998, respondent PCI Leasing and Finance,

Inc. (PCI Leasing for short) filed with the RTC-QC a
complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No.
Q-98-33500.  chanrobles virtual law library

On March 6, 1998, upon an ex-parte application of PCI

Leasing, respondent judge issued a writ of replevin (Annex
B) directing its sheriff to seize and deliver the machineries
and equipment to PCI Leasing after 5 days and upon the
payment of the necessary expenses.  chanrobles virtual law library

On March 24, 1998, in implementation of said writ, the

sheriff proceeded to petitioners factory, seized one
machinery with [the] word that he [would] return for the
other machineries.  chanrobles virtual law library

On March 25, 1998, petitioners filed a motion for special

protective order (Annex C), invoking the power of the court
to control the conduct of its officers and amend and control
its processes, praying for a directive for the sheriff to defer
enforcement of the writ of replevin.  chanrobles virtual law library

This motion was opposed by PCI Leasing (Annex F), on the

ground that the properties [were] still personal and
therefore still subject to seizure and a writ of replevin.  chanrobles virtual law library

In their Reply, petitioners asserted that the properties

sought to be seized [were] immovable as defined in Article
415 of the Civil Code, the parties agreement to the contrary
notwithstanding. They argued that to give effect to the
agreement would be prejudicial to innocent third parties.

240 | P a g e
They further stated that PCI Leasing [was] estopped from
treating these machineries as personal because the contracts
in which the alleged agreement [were] embodied [were]
totally sham and farcical.  chanrobles virtual law library

On April 6, 1998, the sheriff again sought to enforce the writ

of seizure and take possession of the remaining properties.
He was able to take two more, but was prevented by the
workers from taking the rest.  chanrobles virtual law library

On April 7, 1998, they went to [the CA] via an original action

for certiorari.

Ruling of the Court of Appeals  chanrobles virtual law library

Citing the Agreement of the parties, the appellate court held

that the subject machines were personal property, and that
they had only been leased, not owned, by petitioners. It also
ruled that the words of the contract are clear and leave no
doubt upon the true intention of the contracting parties.
Observing that Petitioner Goquiolay was an experienced
businessman who was not unfamiliar with the ways of the
trade, it ruled that he should have realized the import of the
document he signed. The CA further held:  chanrobles virtual law library

Furthermore, to accord merit to this petition would be to

preempt the trial court in ruling upon the case below, since
the merits of the whole matter are laid down before us via a
petition whose sole purpose is to inquire upon the existence
of a grave abuse of discretion on the part of the [RTC] in
issuing the assailed Order and Resolution. The issues raised
herein are proper subjects of a full-blown trial, necessitating
presentation of evidence by both parties. The contract is
being enforced by one, and [its] validity is attacked by the
other a matter x x x which respondent court is in the best
position to determine.  chanrobles virtual law library

Hence, this Petition.11

The Issues  chanrobles virtual law library

241 | P a g e
In their Memorandum, petitioners submit the following
issues for our consideration:  chanrobles virtual law library

A. Whether or not the machineries purchased and imported

by SERGS became real property by virtue of immobilization. 
virtual law library
chanrobles

B. Whether or not the contract between the parties is a loan

or a lease.12  chanrobles virtual law library

In the main, the Court will resolve whether the said

machines are personal, not immovable, property which may
be a proper subject of a writ of replevin. As a preliminary
matter, the Court will also address briefly the procedural
points raised by respondent.

The Courts Ruling  chanrobles virtual law library

The Petition is not meritorious.

Preliminary Matter:Procedural Questions chanrobles virtual law library

Respondent contends that the Petition failed to indicate

expressly whether it was being filed under Rule 45 or Rule
65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent.  chanrobles virtual law library

There is no question that the present recourse is under Rule

45. This conclusion finds support in the very title of the
Petition, which is Petition for Review on Certiorari.13  chanrobles virtual law library

While Judge Laqui should not have been impleaded as a

respondent,14 substantial justice requires that such lapse by
itself should not warrant the dismissal of the present
Petition. In this light, the Court deems it proper to
remove, motu proprio, the name of Judge Laqui from the
caption of the present case.

Main Issue: Nature of the Subject Machinery chanrobles virtual law library

Petitioners contend that the subject machines used in their

factory were not proper subjects of the Writ issued by the
242 | P a g e
RTC, because they were in fact real property. Serious policy
considerations, they argue, militate against a contrary
characterization.  chanrobles virtual law library

Rule 60 of the Rules of Court provides that writs of replevin

are issued for the recovery of personal property
only.15 Section 3 thereof reads:  chanrobles virtual law library

SEC. 3. Order. -- Upon the filing of such affidavit and

approval of the bond, the court shall issue an order and the
corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the
sheriff forthwith to take such property into his custody.  chanrobles virtual law library

On the other hand, Article 415 of the Civil Code enumerates

immovable or real property as follows:  chanrobles virtual law library

ART. 415. The following are immovable property:

x x x....................................x x x....................................x x x  chanrobles virtual law library

(5) Machinery, receptacles, instruments or implements

intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said
industry or works;

x x x....................................x x x....................................x x x  chanrobles virtual law library

In the present case, the machines that were the subjects of

the Writ of Seizure were placed by petitioners in the factory
built on their own land. Indisputably, they were essential
and principal elements of their chocolate-making industry.
Hence, although each of them was movable or personal
property on its own, all of them have become immobilized by
destination because they are essential and principal
elements in the industry.16 In that sense, petitioners are
correct in arguing that the said machines are real, not
personal, property pursuant to Article 415 (5) of the Civil
Code.[17  chanrobles virtual law library

243 | P a g e
Be that as it may, we disagree with the submission of the
petitioners that the said machines are not proper subjects of
the Writ of Seizure.  chanrobles virtual law library

The Court has held that contracting parties may validly

stipulate that a real property be considered as
personal.18 After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under the
principle of estoppel, a party to a contract is ordinarily
precluded from denying the truth of any material fact found
therein.  chanrobles virtual law library

Hence, in Tumalad v. Vicencio,19 the Court upheld the

intention of the parties to treat a house as a personal
property because it had been made the subject of a chattel
mortgage. The Court ruled:  chanrobles virtual law library

x x x. Although there is no specific statement referring to the

subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise.  chanrobles virtual law library

Applying Tumalad, the Court in Makati Leasing and Finance

Corp. v. Wearever Textile Mills[20] also held that the
machinery used in a factory and essential to the industry, as
in the present case, was a proper subject of a writ of replevin
because it was treated as personal property in a contract.
Pertinent portions of the Courts ruling are reproduced
hereunder:  chanrobles virtual law library

x x x. If a house of strong materials, like what was involved

in the above Tumalad case, may be considered as personal
property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and
no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in
its nature and becomes immobilized only by destination or

244 | P a g e
purpose, may not be likewise treated as such. This is really
because one who has so agreed is estopped from denying
the existence of the chattel mortgage.  chanrobles virtual law library

In the present case, the Lease Agreement clearly provides

that the machines in question are to be considered as
personal property. Specifically, Section 12.1 of the
Agreement reads as follows:21  chanrobles virtual law library

12.1 The PROPERTY is, and shall at all times be and remain,
personal property notwithstanding that the PROPERTY or any
part thereof may now be, or hereafter become, in any
manner affixed or attached to or embedded in, or
permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent.  chanrobles virtual law library

Clearly then, petitioners are estopped from denying the

characterization of the subject machines as personal
property. Under the circumstances, they are proper subjects
of the Writ of Seizure.  chanrobles virtual law library

It should be stressed, however, that our holding -- that the

machines should be deemed personal property pursuant to
the Lease Agreement is good only insofar as the contracting
parties are concerned.22 Hence, while the parties are bound
by the Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject
machinery as personal.[23 In any event, there is no showing
that any specific third party would be adversely affected.

Validity of the Lease Agreement  chanrobles virtual law library

In their Memorandum, petitioners contend that the

Agreement is a loan and not a lease.24 Submitting documents
supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement
suffers from intrinsic ambiguity which places in serious
doubt the intention of the parties and the validity of the
lease agreement itself.[25 In their Reply to respondents

245 | P a g e
Comment, they further allege that the Agreement is invalid.
[26 chanrobles virtual law library

These arguments are unconvincing. The validity and the

nature of the contract are the lis mota of the civil action
pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the case.
Hence, they should be threshed out in the trial, not in the
proceedings involving the issuance of the Writ of Seizure.  chanrobles virtual law library

Indeed, in La Tondea Distillers v. CA,27 the Court explained

that the policy under Rule 60 was that questions involving
title to the subject property questions which petitioners are
now raising -- should be determined in the trial. In that case,
the Court noted that the remedy of defendants under Rule 60
was either to post a counter-bond or to question the
sufficiency of the plaintiffs bond. They were not allowed,
however, to invoke the title to the subject property. The
Court ruled:  chanrobles virtual law library

In other words, the law does not allow the defendant to file a
motion to dissolve or discharge the writ of seizure (or
delivery) on ground of insufficiency of the complaint or of
the grounds relied upon therefor, as in proceedings on
preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently being
that said matter should be ventilated and determined only at
the trial on the merits.28  chanrobles virtual law library

Besides, these questions require a determination of facts and

a presentation of evidence, both of which have no place in a
petition for certiorari in the CA under Rule 65 or in a petition
for review in this Court under Rule 45.29

Reliance on the Lease Agreement  chanrobles virtual law library

It should be pointed out that the Court in this case may rely
on the Lease Agreement, for nothing on record shows that it
has been nullified or annulled. In fact, petitioners assailed it

246 | P a g e
first only in the RTC proceedings, which had ironically been
instituted by respondent. Accordingly, it must be presumed
valid and binding as the law between the parties.  chanrobles virtual law library

Makati Leasing and Finance Corporation30 is also instructive

on this point. In that case, the Deed of Chattel Mortgage,
which characterized the subject machinery as personal
property, was also assailed because respondent had
allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing.
The Court rejected the argument and relied on the Deed,
ruling as follows:  chanrobles virtual law library

x x x. Moreover, even granting that the charge is true, such

fact alone does not render a contract void ab initio, but can
only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by
a proper action in court. There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed
that steps were taken to nullify the same. x x x

Alleged Injustice Committed on the Part of Petitioners  chanrobles virtual law library

Petitioners contend that if the Court allows these

machineries to be seized, then its workers would be out of
work and thrown into the streets.31 They also allege that the
seizure would nullify all efforts to rehabilitate the
corporation.  chanrobles virtual law library

Petitioners arguments do not preclude the implementation of

the Writ. As earlier discussed, law and jurisprudence support
its propriety. Verily, the above-mentioned consequences, if
they come true, should not be blamed on this Court, but on
the petitioners for failing to avail themselves of the remedy
under Section 5 of Rule 60, which allows the filing of a
counter-bond. The provision states:  chanrobles virtual law library

SEC. 5. Return of property. -- If the adverse party objects to

the sufficiency of the applicants bond, or of the surety or
sureties thereon, he cannot immediately require the return

247 | P a g e
of the property, but if he does not so object, he may, at any
time before the delivery of the property to the applicant,
require the return thereof, by filing with the court where the
action is pending a bond executed to the applicant, in double
the value of the property as stated in the applicants affidavit
for the delivery thereof to the applicant, if such delivery be
adjudged, and for the payment of such sum to him as may be
recovered against the adverse party, and by serving a copy
bond on the applicant.  chanrobles virtual law library

WHEREFORE, the Petition is DENIED and the assailed

Decision of the Court of Appeals AFFIRMED. Costs against
petitioners.  chanrobles virtual law library

SO ORDERED.  chanrobles virtual law library

248 | P a g e
G.R. No. 195450

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner

vs.
HON. EMMANUEL C. CARPIO, in his capacity as Presiding Judge, Regional Trial Court,
Branch 16, Davao City, COUNTRY BANKERS INSURANCE CORPORATION, DABAY ABAD,
HATAB ABAD, OMAR ABAS, HANAPI ABDULLAH, ROJEA AB ABDULLAH, ABDULLAH
ABEDIN, ALEX ABEDIN, et al., represented by their Attorney-in-Fact, MR. MANUEL L. TE,
Respondents

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the July 9, 2008
Decision  and the January 21, 2011 Resolution  of the Court of Appeals (CA) in CA-G.R. SP No.
1 2

85719, which dismissed the petition for certiorari and mandamus praying for the annulment of the
May 17, 2004 and July 9, 2004 Orders  of the Regional Trial Court, Branch 16, Davao City (RTC), in
3

Civil Case No. 28,721-01.

The Antecedents

On August 21, 2001, Dabay Abad, Hatab Abad, Omar Abas, Hanapi Abdullah, Rojea Ab Abdullah,
Abdullah Abedin, Alex Abedin, et al.(Abad, et al.), represented by their attorney-in-fact, Manuel L.
Te, filed a complaint for delivery of certificates of title, damages, and attorney's fees against
petitioner Development Bank of the Philippines (DBP) and Guarantee Fund for Small and Medium
Enterprise (GFSME) before the RTC. 4

In their, Complaint,  Abad, et al. prayed, among others, for the issuance of a writ of seizure, pending
5

hearing of the case, for delivery of their certificates of title they claimed to be unlawfully detained by
DBP and GFSME. They alleged that their certificates of title were submitted to DBP for safekeeping
pursuant to the loan agreement they entered into with DBP. The same certificates of title were
turned over by DBP to GFSME because of its call on GFSME's guarantee on their loan, which
became due and demandable, and pursuant to the guarantee agreement between DBP and
GFSME.

As prayed for, the RTC issued the Writ of Seizure  on August 24, 2001. The writ was accompanied
6

by Plaintiffs Bond for Manual Delivery of Personal Property  issued by Country Bankers Insurance
7

Corporation (CBIC).

On September 5, 2001, DBP filed its Omnibus Motion to Dismiss Complaint and to Quash Writ of
Seizure  on the ground of improper venue, among others. Abad, et al. filed their Opposition  and
8 9

later, their Supplemental Opposition,  to which they attached the Delivery Receipt  showing that the
10 11

court sheriff took possession of 228 certificates of title from GFSME.

In its Order,  dated September 25, 2001, the RTC granted DBP's omnibus motion and dismissed the
12

case for improper venue.

249 | P a g e
On December 20, 2001, DBP and GFSME filed their Joint Motion to Order Plaintiffs to Return Titles
to Defendants DBP and GFSME.  After Abad, et al. filed their opposition, the RTC issued the
13

Order,  dated January 27, 2003, directing Abad, et al. to return the 228 certificates of title.
14

Abad, et al. filed a petition for certiorari and prohibition with the Court praying, among others, for the
nullification and reversal of the January 27, 2003 Order of the RTC. The Court, however, in its June
9, 2003 Resolution,  dismissed the petition.
15

On September 18, 2003, DBP filed its Motion for Writ of Execution  of the January 27, 2003 Order
16

before the RTC. On December 16, 2003, the RTC issued the corresponding Writ of Execution.  The 17

Sheriffs Return of Service,  however, indicated that Abad, et al. failed to deliver the certificates of
18

title.

The Subject Motion against the Bond

Due to the non-delivery of the certificates of title by Abad, et al., DBP filed its Motion/Application to
Call on Plaintiff's Surety Bond,  dated February 3, 2004, praying for the release of the bond issued
19

by CBIC to answer for the damages it sustained as a result of the failure to return the 228 certificates
of title.

The RTC Ruling

In its Order, dated May 17, 2004, the RTC denied the subject motion explaining that the resolution of
the motion was no longer part of its residual power. It pointed out that although there was indeed an
order to return the 228 certificates of title to DBP, it was not made as a result of a trial of the case,
but as a consequence of the order of dismissal based on improper venue.

DBP moved for reconsideration. Nevertheless, in its July 9, 2004 Order, the RTC denied the motion.

Aggrieved, DBP filed a petition for certiorari and mandamus before the CA.

The CA Ruling

In its July 9, 2008 Decision, the CA dismissed the petition for certiorari and mandamus. It noted that
DBP did not move for reconsideration of the September 25, 2001 Order of dismissal. It considered
the RTC decision as final and executory. It added that Section 20, Rule 57 of the Rules of Court
provided that the claim for damages against the bond must be filed before trial or before appeal was
perfected or before the judgment became executory. 20

DBP moved for reconsideration, but its motion was denied by the CA in its January 21, 2011
Resolution.

Hence, this petition.

ISSUE

THE COURT OF APPEALS ERRED IN ITS BLIND ADHERENCE TO AND STRICT APPLICATION
OF SECTION 20, RULE 57 OF THE 1997 RULES OF CIVIL PROCEDURE. 21

Petitioner DBP argues that it could not have anticipated that Abad, et al. (respondents) would not
abide by the writ of execution; hence, prior to such failure of execution, it would be premature to

250 | P a g e
claim for damages against the bond because DBP had not yet suffered any consequential damages
with the implementation of the writ of seizure; and that Section 20, Rule 57 of the Rules of Court was
not applicable as the damages resulting from the improper issuance of the writ of seizure occurred
only after the unjustified refusal of respondents to return the titles despite the order from the RTC.

In its Comment,  dated August 11, 2011, respondent CBIC averred that Section 20, Rule 57 of the
22

Rules of Court specified that an application for damages on account of improper, irregular or
excessive attachment must be filed before the trial or before appeal is perfected or before the
judgment becomes executory; that the motion to call on plaintiff's surety bond was filed more than
two (2) years after the September 25, 2001 Order of the RTC, dismissing the case, became final and
executory; that, under Section 10, Rule 60 of the Rules of Court, the surety's liability under the
replevin bond should be included in the final judgment; that, there being no judgment as to who,
between the plaintiffs and the defendants, was entitled to the possession of the certificates of title,
the R TC properly denied the motion to call on plaintiff's surety bond; that, any claim for damages
against the bond was only proper with respect to any loss that DBP might have suffered by being
compelled to surrender the possession of the certificates of title pending trial of the action; that, in
this case, the motion to call on plaintiffs surety bond was filed after the trial was already terminated
with the issuance of the order of dismissal; and that, instead of moving to claim for damages, DBP
sought to quash the writ of seizure, even though it might already have some basis to claim for
damages at that time as could be gleaned from the wordings of their motion to dismiss the
complaint, based on, among others, improper venue and inapplicability of replevin as proper
remedy.

Respondents, on the other hand, failed to file their comment despite several opportunities granted to
them. Thus, their right to file a comment on the petition for review was deemed waived.

In its Consolidated Reply,  dated August 15, 2016, DPB asserted that Section 20, Rule 57 of the
23

Rules of Court did not cover a situation where there was an instantaneous dismissal of the case due
to improper venue; that the damages resulting from the improper issuance of the writ of seizure
occurred only after the unjustified refusal of respondents to return the titles despite order from the
RTC; and, that DBP could not resort to the surety prior to recovering the titles from respondents at
any time during the trial or before the judgment became final and executory.

The Court's Ruling

The petition lacks merit.

The trial court did not reach

the residual jurisdiction stage

Residual jurisdiction refers to the authority of the trial court to issue orders for the protection and
preservation of the rights of the parties which do not involve any matter litigated by the appeal; to
approve compromises; to permit appeals by indigent litigants; to order execution pending appeal in
accordance with Section 2, Rule 39; and to allow the withdrawal of the appeal, provided these are
done prior to the transmittal of the original record or the record on appeal, even if the appeal has
already been perfected or despite the approval of the record on appeal  or in case of a petition for
24

review under Rule 42, before the CA gives due course to the petition. 25

The "residual jurisdiction" of the trial court is available at a stage in which the court is normally
deemed to have lost jurisdiction over the case or the subject matter involved in the appeal. This
stage is reached upon the perfection of the appeals by the parties or upon the approval of the
records on appeal, but prior to the transmittal of the original records or the records on appeal. In

251 | P a g e
either instance, the trial court still retains its so-called residual jurisdiction to issue protective orders,
approve compromises, permit appeals of indigent litigants, order execution pending appeal, and
allow the withdrawal of the appeal. 26

From the foregoing, it is clear that before the trial court can be said to have residual jurisdiction over
a case, a trial on the merits must have been conducted; the court rendered judgment; and the
aggrieved party appealed therefrom.

In this case, there was no trial on the merits as the case was dismissed due to improper venue and
respondents could not have appealed the order of dismissal as the same was a dismissal, without
prejudice. Section 1 (h), Rule 41 of the Rules of Civil Procedure states that no appeal may be taken
from an order dismissing an action without prejudice. Indeed, there is no residual jurisdiction to
speak of where no appeal has even been filed. 27

In Strongworld Construction Corporation, et al. v. Hon. Perello, et al.,  the Court elucidated on the
28

difference between a dismissal with prejudice and one without prejudice:

We distinguish a dismissal with prejudice from a dismissal without prejudice. The former disallows

and bars the refiling of the complaint; whereas, the same cannot be said of a dismissal without
prejudice. Likewise, where the law permits, a dismissal with prejudice is subject to the right of
appeal. 1âwphi1

xxx

Section 1, Rule 16 of the 1997 Revised Rules of Civil Procedure enumerates the grounds for which
a motion to dismiss may be filed, viz.:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

(a) That the court has no jurisdiction over the person of the defending party;

(b) That the court has no jurisdiction over the subject matter of the claim;

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same cause;

(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

(g) That the pleading asserting the claim states no cause of action;

(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned,
or otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions of the statute
of frauds; and

252 | P a g e
(j) That a condition precedent for filing the claim has not been complied with.

Section 5 of the same Rule, recites the effect of a dismissal under Sections 1(f), (h), and (i), thereof,
thus:

SEC. 5. Effect of dismissal. Subject to the right of appeal, an order granting a motion to dismiss
based on paragraphs (f), (h), and (i) of section 1 hereof shall bar the refiling of the same action or
claim.

Briefly stated, dismissals that are based on the following grounds, to wit: (1) that the cause of action
is barred by a prior judgment or by the statute of limitations; (2) that the claim or demand set forth in
the plaintiffs pleading has been paid, waived, abandoned or otherwise extinguished; and (3) that the
claim on which the action is founded is unenforceable under the provisions of the statute of frauds,
bar the refiling of the same action or claim. Logically, the nature of the dismissal founded on any of
the preceding grounds is with prejudice because the dismissal prevents the refiling of the same
action or claim. Ergo, dismissals based on the rest of the grounds enumerated are without prejudice
because they do not preclude the refiling of the same action.

xxx

As has been earlier quoted, Section 1(h), Rule 41 of the 1997 Revised Rules of Civil Procedure
mandates that no appeal may be taken from an order dismissing an action without prejudice. The
same section provides that in such an instant where the final order is not appealable, the aggrieved
party may file an appropriate special civil action under Rule 65. 29

Here, the RTC dismissed the replevin case on the ground of improper venue. Such dismissal is
one without prejudice and does not bar the refiling of the same action; hence, it is not appealable.
Clearly, the RTC did not reach, and could not have reached, the residual jurisdiction stage as the
case was dismissed due to improper venue, and such order of dismissal could not be the subject of
an appeal. Without the perfection of an appeal, let alone the unavailability of the remedy of appeal,
the RTC did not acquire residual jurisdiction. Hence, it is erroneous to conclude that the RTC may
rule on DBP's application for damages pursuant to its residual powers.

Equity cannot supersede the

Rules of Court

DBP admits that it filed the application for damages after the order of dismissal had become final
and executory. In seeking relief from this Court, however, it invokes equity and argues that a strict
application of Section 20, Rule 57 of the Rules of Court would prejudice its right to recover damages
arising from the improper attachment of the certificates of title.

DBP, however, must be reminded that equity, "which has been aptly described as a 'justice outside
legality,' is applied only in the absence of, and never against, statutory law or, as in this case, judicial
rules of procedure.  The pertinent positive rules being present here, they should preempt and prevail
30

over all abstract arguments based only on equity."  As the Court has stated in Lim Tupas v.
31

CA,  "[ e]motional appeals for justice, while they may wring the heart of the Court, cannot justify
32

disregard of the mandate of the law as long as it remains in force. The applicable maxim, which goes
back to the ancient days of the Roman jurists - and is now still reverently observed - is 'aequetas
nunquam contravenit legis.'" 33

253 | P a g e
Accordingly, the CA did not commit any reversible error when it applied the rules of procedure in
resolving the issue at hand.

The application for damages

was belatedly filed

Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in receivership and
injunction cases, the damages to be awarded to either party upon any bond filed by the other shall
be claimed, ascertained, and granted in accordance with Section 20 of Rule 57 which reads:

SEC. 20. Claimfor damages on account of illegal attachment. - If the judgment on the action be in
favor of the party against whom attachment was issued, he may recover, upon the bond given or
deposit made by the attaching creditor, any damages resulting from the attachment. Such damages
may be awarded only upon application and after proper hearing, and shall be included in the
final judgment. The application must be filed before the trial or before appeal is perfected or before
the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an
application with notice to the party in whose favor the attachment was issued or his surety or
sureties, before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court. [Emphases supplied]

In other words, to recover damages on a replevin bond (or on a bond for preliminary attachment,
injunction or receivership), it is necessary (1) that the defendant-claimant has secured a favorable
judgment in the main action, meaning that the plaintiff has no cause of action and was not, therefore,
entitled to the provisional remedy of replevin; (2) that the application for damages, showing
claimant's right thereto and the amount thereof, be filed in the same action before trial or before
appeal is perfected or before the judgment becomes executory; (3) that due notice be given to the
other party and his surety or sureties, notice to the principal not being sufficient; and (4) that there
should be a proper hearing and the award for damages should be included in the final judgment. 34

Likewise, to avoid multiplicity of suits, all incidents arising from the same controversy must be settled
in the same court having jurisdiction of the main action. Thus, the application for damages must be
filed in the court which took cognizance of the case, with due notice to the other parties.35

In this case, DBP filed the application for damages long after the order of dismissal had become final
and executory. It explained that this belated filing was due to its recourse to other remedies, such as
the enforcement of the writ of execution. The Court, however, finds this reason to be wanting in
persuasiveness. To begin with, the filing of an application for damages does not preclude resort to
other remedies. Nowhere in the Rules of Court is it stated that an application for damages bars the
filing of a motion for a writ of seizure, a writ of execution or any other applicable remedy. DBP, from
the beginning, had already perceived the attachment to be improper; hence, it could have easily filed
an application before the judgment became executory.

In Jao v. Royal Financing Corporation,  the Court precluded the defendant therein from claiming
36

damages against the surety bond because it failed to file the application for damages before the
termination of the case, thus:

xxx The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had become final
and executory before the defendant-appellee corporation filed its motion for judgment on the bond

254 | P a g e
on September 7, 1959. In the order of the trial court, dismissing the complaint, there appears no
pronouncement whatsoever against the surety bond. The appellee-corporation failed to file its
proper application for damages prior to the termination of the case against it. It is barred to do
so now. The prevailing party, if such would be the proper term for the appellee-corporation, having
failed to file its application for damages against the bond prior to the entry of final judgment, the
bondsman-appellant is relieved of further liability thereunder. [Emphases supplied] 37

Thus, the RTC has indeed no residual jurisdiction on DBP's claim for damages.

Remedies

The Court is not unmindful of the plight of DBP. Its chosen remedy, however, cannot be
countenanced as it disregards the Rules of Court and the settled jurisprudence on the matter.
Nevertheless, this is not to say that DBP has no other available remedies in order to recover
respondents' indebtedness.

First, DBP could enforce its guarantee agreement with GFSME. A contract of guaranty gives rise to
a subsidiary obligation on the part of the guarantor.  A guarantor agrees that the creditor, after
38

proceeding against the principal, may proceed against the guarantor if the principal is unable to pay.
Moreover, he contracts to pay if, by the use of due diligence, the debt cannot be made out of the
principal debtor. 39

Further, it may file an action for damages based on Article 19 of the New Civil Code against
respondents for unlawfully taking the certificates of title, which served as security for their loan.
In Globe Mackay Cable and Radio Corporation v. Court of Appeals,  the Court held:
40

This article, known to contain what is commonly referred to as the principle of abuse of rights, sets
certain standards which must be observed not only in the exercise of one's rights, but also in the
performance of one's duties. These standards are the following: to act with justice; to give everyone
his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation
on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be
observed. A right, though by itself legal because recognized or granted by law as such, may
nevertheless become the source of some illegality. When a right is exercised in a manner which
does not conform with the norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must be held responsible. But while Article 19
lays down a rule of conduct for the government of human relations and for the maintenance of social
order, it does not provide a remedy for its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper.  [Emphasis supplied]
41

Finally, nothing precludes DBP from instituting an action for collection of sum of money against
respondents.  Besides, if the parcels of land covered by the certificates of title, which DBP sought to
1âwphi1

recover from respondents, were mortgaged to the former, then DBP, as mortgage-creditor, has the
option of either filing a personal action for collection of sum of money or instituting a real action to
foreclose on the mortgage security. The two remedies are alternative and each remedy is complete
by itself. If the mortgagee opts to foreclose the real estate mortgage, he waives the action for the
collection of the debt, and vice versa.42

WHEREFORE, the petition is DENIED. The July 9, 2008 Decision and the January 21, 2011
Resolution of the Court of Appeals, in CA-G.R. SP No. 85719, are AFFIRMED in toto.

SO ORDERED.

255 | P a g e
256 | P a g e
G.R. No. 193494

LUI ENTERPRISES, INC., Petitioners,

vs.
ZUELLIG PHARMA CORPORATION and the PHILIPPINE BANK OF
COMMUNICATIONS, Respondents.

DECISION

LEONEN, J.:

There should be no inexplicable delay in the filing of a motion to set aside order of default. Even
when a motion is filed within the required period, excusable negligence must be properly alleged and
proven.

This is a petition for review on certiorari of the Court of Appeals' decision  dated May 24, 2010 and
1

resoluticm  dated August 13, 2010 in CA- G.R. CV No. 88023. The Court of Appeals affirmed in toto
2

the Regional

Trial Court of Makati’s decision  dated July 4, 2006.

3

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10-year
contract of lease  over a parcel of land located in Barrio Tigatto, Buhangin, Davao City. The parcel of
4

land was covered by Transfer Certificate of Title No. T-166476 and was registered under Eli L. Lui. 5

On January 10, 2003, Zuellig Pharma received a letter  from the Philippine Bank of Communications.
6

Claiming to be the new owner of the leased property, the bank asked Zuellig Pharma to pay rent
directly to it. Attached to the letter was a copy of Transfer Certificate of Title No. 336962 under the
name of the Philippine Bank of Communications.  Transfer Certificate ofTitle No. 336962 was
7

derived fromTransfer Certificate ofTitle No.T-166476. 8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications’ claim.
On January 28, 2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its right to collect the
leased property’srent. 9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of Communications over the
rental payments, Zuellig Pharma filed a complaint  for interpleader with the Regional Trial Court of
10

Makati. In its complaint, Zuellig Pharma alleged that it already consigned in court P604,024.35 as
rental payments. Zuellig Pharma prayed that it be allowed to consign in court its succeeding monthly
rental payments and that Lui Enterprises and the Philippine Bank of Communications be ordered to
litigate their conflicting claims.
11

The Philippine Bank of Communications filed its answer  to the complaint. On the other hand, Lui
12

Enterprises filed a motion to dismiss  on the ground that Zuellig Pharma’s alleged representative did
13

not have authority to file the complaint for interpleader on behalf of the corporation. Under the
secretary’s certificate  dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta was only
14

authorized to "initiate and represent [Zuellig Pharma] in the civil proceedings for consignation of

257 | P a g e
rental payments to be filed against Lui Enterprises, Inc. and/or [the Philippine Bank of
Communications]." 15

According to Lui Enterprises, an earlier filed nullification of deed of dation in payment case pending
with the Regional Trial Court of Davao barred the filing of the interpleader case.  Lui Enterprises
16

filed this nullification case against the Philippine Bank of Communications with respect to several
properties it dationed to the bank in payment of its obligations. The property leased by Zuellig
Pharma was among those allegedly dationed to the Philippine Bank of Communications. 17

In the nullification of deed of dation in payment case, Lui Enterprises raised the issue of which
corporation had the better right over the rental payments.  Lui Enterprises argued that the same
18

issue was involved in the interpleader case. To avoid possible conflicting decisions of the Davao trial
court and the Makati trial court on the same issue, Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.

To support its argument, Lui Enterprises cited a writ of preliminary injunction  dated July 2, 2003
19

issued by the Regional Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of
Communications "[to maintain] status quo"  with respect to the rent. By virtue of the writ of
20

preliminary injunction, Lui Enterprises argued that it should continue collecting the rental payments
from its lessees until the nullification of deed of dation in payment case was resolved. The writ of
preliminary injunction dated July 2, 2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue, restraining and
enjoining [the Philippine Bank of Communications], its agents or [representative], the Office of the
Clerk of Court- Sheriff and all persons acting on their behalf, from conducting auction sale on the
properties of [Lui Enterprises] in EJF-REM Case No. 6272-03 scheduled on July 3, 2003 at 10:00
a.m. at the Hall of Justice, Ecoland, Davao City, until the final termination of the case, upon plaintiff
[sic] filing of a bond in the amount of P1,000,000.00 to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court should finally decide that applicant is not entitled
thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the Philippine Bank
of Communications] and all [its] attorneys, representatives, agents and any other persons assisting
[the bank], are directed to restrain from conducting auction sale on the Properties of [Lui Enterprises]
in EJF-REM Case No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case. 21

Zuellig Pharma filed its opposition  to the motion to dismiss. It argued that the motion to dismiss
22

should be denied for having been filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil
Procedure, a motion to dismiss should be filed within the required time given to file an answer to the
complaint, which is 15 days from service of summons on the defendant.  Summons was served on
23

Lui Enterprises on July 4, 2003. It had until July 19, 2003 to file a motion to dismiss, but Lui
Enterprises filed the motion only on July23, 2003. 24

As to Lui Enterprises’ claim that the interpleader case was filed without authority, Zuellig Pharma
argued that an action interpleader "is a necessary consequence of the action for
consignation."  Zuellig Pharma consigned its rental payments because of "the clearly conflicting
25

claims of [Lui Enterprises] and [the Philippine Bank of Communications]."  Since Atty. Ana L.A.
26

258 | P a g e
Peralta was authorized to file a consignation case, this authority necessarily included an authority to
file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretary’s certificate dated August 28, 2003,  which27

expressly stated that Atty. Ana L.A. Peralta was authorized to file a consignation and interpleader
case on behalf of Zuellig Pharma. 28

With respect to the nullification of deed of dation in payment case, Zuellig Pharma argued that its
pendency did not bar the filing of the interpleader case. It was not a party to the nullification case. 29

As to the writ of preliminary injunction issued by the Regional Trial Court of Davao, Zuellig Pharma
argued that the writ only pertained to properties owned by Lui Enterprises. Under the writ of
preliminary injunction, the Regional Trial Court of Davao enjoined the July 3, 2003 auction sale of Lui
Enterprises’ properties, the proceeds of which were supposed to satisfy its obligations to the
Philippine Bank of Communications. As early as April 21, 2001, however, the Philippine Bank of
Communications already owned the leased property as evidenced by Transfer Certificate of Title No.
336962. Thus, the writ of preliminary injunction did not apply to the leased property. 30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to file an
answer, Zuellig Pharma moved that Lui Enterprises be declared in default. 31

In its compliance  dated September 15, 2003, the Philippine Bank of Communications "[joined
32

Zuellig Pharma] in moving to declare [Lui Enterprises] in default, and in [moving for] the denial of [Lui
Enterprises’] motion to dismiss." 33

The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to dismiss within
the reglementary period. Thus, in its order  dated October 6, 2003, the trial court denied Lui
34

Enterprises’motion to dismiss and declared it in default. 35

Lui Enterprises did not move for the reconsideration of the order dated October 6, 2003. Thus, the
Makati trial court heard the interpleader case without Lui Enterprises’participation.

Despite having been declared in default, Lui Enterprises filed the manifestation with prayer  dated
36

April 15, 2004. It manifested that the Regional Trial Court of Davao allegedly issued the order  dated 37

April 1, 2004, ordering all of Lui Enterprises’ lessees to "observe status quo with regard to the rental
payments"  and continue remitting their rental payments to Lui Enterprises while the nullification of
38

deed of dation in payment case was being resolved. The order dated April 1, 2004 of the Regional
Trial Court of Davao reads:

ORDER

Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises] on September
23, 2003 seeking for the preservation of status quo on the payment/remittance of rentals to [it] and
the disposal/construction of the properties subject matter of this case.

xxxx

As elsewhere stated, [the Philippine Bank of Communications] did not oppose the instant motion up
to the present. In fact, during the hearing held on March 15, 2004, [the bank’s] counsel manifested in
open court that except for the rentals due from [Zuellig Pharma] which are the subject of a

259 | P a g e
consignation suit before a Makati Court, the other rental payments are continuously received by [Lui
Enterprises].

There being no objection from [the Philippine Bank of Communications], and in order to protect the
right of [Lui Enterprises] respecting the subject of the action during the pendency of this case, this
Court, in the exercise of its discretion hereby grants the motion.

Accordingly, consistent with the order of this Court dated June 30, 2003, the parties are hereby
directed to further observe status quo with regard to the rental payments owing or due from the
lessees of the properties subject of the first set of deeds of dacion and that the defendants are
enjoined from disposing of the properties located at Green Heights Village, Davao City until the case
is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as basis, Lui
Enterprises argued that Zuellig Pharma must remit its rental payments to it and prayed that the
interpleader case be dismissed.

The Regional Trial Court of Makati only noted the manifestation with prayer dated April 15, 2004. 39

It was only on October 21, 2004, or one year after the issuance of the order of default, that Lui
Enterprises filed a motion to set aside order of default  in the Makati trial court on the ground of
40

excusable negligence. Lui Enterprises argued that its failure to file a motion to dismiss on time "was
caused by the negligence of [Lui Enterprises’] former counsel."  This negligence was allegedly
41

excusable because "[Lui Enterprises] was prejudiced and prevented from fairly presenting [its]
case."42

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed nullification of deed
of dation in payment case barred the filing of the interpleader case. The two actions allegedly
involved the same parties and the same issue of which corporation had the better right over the
rental payments. To prevent "the possibility of two courts x x x rendering conflicting rulings [on the
same issue],"  Lui Enterprises argued that the subsequently filed interpleader case be dismissed.
43

Zuellig Pharma filed its opposition  to the motion to set aside order of default. It argued that a
44

counsel’s failure to file a timely answer was inexcusable negligence which bound his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of dation in payment
"[did] not preclude [Zuellig Pharma] from seeking the relief prayed for in the [interpleader case]." 45

While the motion to set aside order of default was still pending for resolution, Lui Enterprises filed the
manifestation and motion to dismiss  dated April 21, 2005 in the Makati trial court. It manifested that
46

the Davao trial court issued another order  dated April 18, 2005 in the nullification of deed of dation
47

in payment case. In this order, the Davao trial court directed the Philippine Bank of Communications
to inform Zuellig Pharma to pay rent to Lui Enterprises while the Davao trial court’s order dated April
1, 2004 was subsisting. The order datedApril 18, 2005 of the Davao trial court reads:

ORDER

Plaintiffs move for execution or implementation of the Order dated September 14, 2004. In
substance, [Lui Enterprises] seek[s] to compel the remittance in their favor of the rentals from
[Zuellig Pharma], one of the lessees alluded to in the September 14, 2004 Order whose rental

260 | P a g e
payments "must be remitted to and collected by [Lui Enterprises]." [The Philippine Bank of
Communications] did not submit any opposition.

It appears from the records that sometime in February 2003, after being threatened with a lawsuit
coming from [the Philippine Bank of Communications], [Zuellig Pharma] stopped remitting its rentals
to [Lui Enterprises] and instead, has reportedly deposited the monthly rentals before a Makati court
for consignation.

As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Court’s ruling be
contrary to or in conflict with the status quo order issued by this Court. To preclude this spectacle,
Zuellig Pharma should accordingly be advised with the import of the Order dated September 14,
2004, the salient portion of which is quoted:

x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs were given
as they did exercise the right to collect, receive and enjoy rental payments x x x.

Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary
injunction issued on June 30, 2003, it follows that plaintiff's right to collect and receive rental
payments which he enjoyed prior to the filing of this case, must be respected and protected and
maintained until the case is resolved. As such, all rentals due from the above-enumerated lessees
must be remitted to and collectedby the Plaintiffs.

Status quo simply means the last actual peaceable uncontested status that preceded the actual
controversy. (Searth Commodities Corp. v. Court ofAppeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith inform [Zuellig
Pharma] of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and
consequently, for the said lessee to remit all rentals due from February 23, 2003 and onwards to [Lui
Enterprises] in the meanwhile that the status quo order is subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the dismissal of
the interpleader case to prevent "the possibility of [the Regional Trial Court, Branch 143, Makati City]
and [the Regional Trial Court, Branch 16, Davao City] rendering conflicting rulings [on the same
issue of which corporation has the better right to the rental payments]." 48

Without resolving the motion to set aside order of default, the Makati trial court denied the
manifestation with motion to dismiss dated April 21, 2005 on the ground that Lui Enterprises already
lost its standing in court.
49

Lui Enterprises did not file any motion for reconsideration of the denial of the manifestation and
motion to dismiss dated April 21, 2005.

In its decision  dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui Enterprises
50

"[was] barred from any claim in respect of the [rental payments]"  since it was declared in default.
51

Thus, according to the trial court, there was no issue as to which corporation had the better right
over the rental payments.  The trial court awarded the total consigned amount of P6,681,327.30 to
52

the Philippine Bank of Communications and ordered Lui Enterprises to pay Zuellig Pharma
P50,000.00 in attorney’s fees. 53

Lui Enterprises appealed to the Court of Appeals. 54

261 | P a g e
The Court of Appeals found Lui Enterprises’ appellant’s brief insufficient. Under Rule 44, Section 13
of the 1997 Rules of Civil Procedure, an appellant’s brief must contain a subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues,
among others. However, Lui Enterprises’ appellant’s brief did not contain these requirements. 55

As to the denial of Lui Enterprises’ motion to dismiss, the Court of Appeals sustained the trial court.
The Court of Appeals found that Lui Enterprises filed its motion to dismiss four days late. 56

With respect to Lui Enterprises’ motion to set aside order of default, the Court ofAppeals found that
Lui Enterprises failed to show the excusable negligence that prevented it from filing its motion to
dismiss on time. On its allegedly meritorious defense, the Court of Appeals ruled that the nullification
of deed of dation in payment case did not bar the filing of the interpleader case, with Zuellig Pharma
not being a party to the nullification case.57

On the award of attorney’s fees, the Court of Appeals sustained the trial court since "Zuellig Pharma
x x x was constrained to file the action for interpleader with consignation inorder to protect its
interests x x x."
58

Thus, in its decision  promulgated on May 24, 2010, the Court of Appeals dismissed Lui
59

Enterprises’appeal and affirmed in toto the Regional Trial Court of Makati’s decision.

Lui Enterprises filed a motion for reconsideration. 60

The Court of Appeals denied Lui Enterprises’ motion for reconsideration in its resolution promulgated
on August 13, 2010.  Hence, this petition.
61

In this petition for review on certiorari,  Lui Enterprises argued that the Court of Appeals applied "the
62

rules of procedure strictly"  and dismissed its appeal on technicalities. According to Lui Enterprises,
63

the Court of Appeals should have taken a liberal stance and allowed its appeal despite the lack of
subject index, page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in its appellant’s brief.64

Lui Enterprises also claimed that the trial court should have set aside the order of default since its
failure to file a motion to dismiss on time was due to excusable negligence. 65

For its allegedly meritorious defense, Lui Enterprises argued that the pending nullification of deed of
dation in payment case barred the filing of the interpleader case.The nullification of deed of dation in
payment case and the interpleader case allegedly involved the same issue of which corporation had
the better right to the rent. To avoid conflicting rulings on the same issue, Lui Enterprises argued that
the subsequently filed interpleader case be dismissed. 66

No attorney’s fees should have been awarded to Zuellig Pharma as argued by Lui Enterprises.
Zuellig Pharma filed the interpleader case despite its knowledge of the nullification of deed of dation
in payment case filed in the Davao trial court where the same issue of which corporation had the
better right over the rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader
case in bad faith for which it was not entitled to attorney’s fees. 67

The Philippine Bank of Communications filed its comment  on the petition for review on certiorari. It
68

argued that Lui Enterprises failed to raise any error of law and prayed that we affirm in toto the Court
of Appeals’ decision.

262 | P a g e
For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communications’arguments in its comment. 69

The issues for our resolution are:

I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for lack of subject
index, page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in Lui Enterprises’appellant’s brief;

II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprises’motion to set
aside order of default;

III. Whether the annulment of deed of dation in payment pending in the Regional Trial Court
of Davao barred the subsequent filing of the interpleader case in the Regional Trial Court of
Makati; and

IV. Whether Zuellig Pharma was entitled to attorney’s fees.

Lui Enterprises’ petition for review on certiorari is without merit. However, we delete the award of
attorney’s fees.

Lui Enterprises did not comply with the rules on the contents of the appellant’s brief

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court of Appeals
may, on its own motion or that of the appellee, dismiss an appeal should the appellant’s brief lack
specific requirements under Rule 44, Section 13, paragraphs (a), (c), (d), and (f):

Section 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the Court of Appeals,
on its own motion or on that of the appellee, on the following grounds:

xxxx

(f) Absence of specific assignment of errors in the appellant’s brief, or of page references to the
record as required in Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

These requirements are the subject index of the matter in brief, page references to the record, and a
table of cases alphabetically arranged and with textbooks and statutes cited:

Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain, in the order herein
indicated, the following:

(a) A subject index of the matter in brief with a digest of the arguments and page references, and a
table of cases alphabetically arranged, textbooks and statutes cited with references to the pages
where they are cited;

xxxx

263 | P a g e
(c) Under the heading "Statement of the Case," a clear and concise statement of the nature of the
action, a summary of the proceedings, the appealed rulings and orders of the court, the nature of the
controversy, with page references to the record;

(d) Under the heading "Statement of Facts," a clear and concise statement in a narrative form of the
facts admitted by both parties and of those in controversy, together with the substance of the proof
relating thereto in sufficient detail to make it clearly intelligible, with page references to the record;

xxxx

(f) Under the heading "Argument," the appellant’s arguments on each assignment of error with page
references to the record. The authorities relied upon shall be cited by the page of the report at which
the case begins and the page of the report on which the citation isfound;

xxxx

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record, and table of
cases, textbooks and statutes cited. Under Rule 50, Section 1 of the 1997 Rules of Civil Procedure,
the Court of Appeals correctly dismissed Lui Enterprises’ appeal.

Except for cases provided in the Constitution,  appeal is a "purely statutory right."  The right to
70 71

appeal "must be exercised in the manner prescribed by law"  and requires strict compliance with the
72

Rules of Court on appeals.  Otherwise, the appeal shall be dismissed, and its dismissal shall not be
73

a deprivation of due process of law.

In Mendoza v. United Coconut Planters Bank, Inc.,  this court sustained the Court of Appeals’
74

dismissal of Mendoza’s appeal. Mendoza’s appellant’s brief lacked a subject index, assignment of
errors, and page references to the record. In De Liano v. Court of Appeals,  this court also sustained
75

the dismissal of De Liano’s appeal. De Liano’s appellant’s brief lacked a subject index, a table of
cases and authorities, and page references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona International, Inc.,  the
76

Philippine Coconut Authority’s appellant’s brief lacked a clear and concise statement of the nature of
the action, a summary of the proceedings, the nature of the judgment, and page references to the
record. However, this court found that the Philippine Coconut Authority substantially complied with
the Rules. Its appellant’s brief "apprise[d] [the Court of Appeals] of the essential facts and nature of
the case as well as the issues raised and the laws necessary [to dispose of the case]."  This court
77

"[deviated] from a rigid enforcement of the rules"  and ordered the Court of Appeals to resolve the
78

Philippine Coconut Authority’s appeal.

In Go v. Chaves,  Go’s 17-page appellant’s brief lacked a subject index. However, Go subsequently
79

filed a subject index. This court excused Go’s procedural lapse since the appellant’s brief
"[consisted] only of 17 pages which [the Court of Appeals] may easily peruse to apprise it of [the
case] and of the relief sought."  This court ordered the Court of Appeals to resolve Go’s appeal "in
80

the interest of justice."

81

In Philippine Coconut Authority and Go, the appellants substantially complied with the rules on the
contents of the appellant’s brief. Thus, this court excused the appellants’procedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the contents of the
appellant’s brief. It admitted that its appellant’s brief lacked the required subject index, page

264 | P a g e
references to the record, and table of cases, textbooks, and statutes cited. However, it did not even
correct its admitted "technical omissions"  by filing an amended appellant’s brief with the required
82

contents.  Thus, this case does not allow a relaxation of the rules. The Court of Appeals did not err
83

in dismissing Lui Enterprises’ appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases before the Court
ofAppeals."  With respect to the appellant’s brief, its required contents are designed "to minimize the
84

[Court ofAppeals’] labor in [examining]the record uponwhich the appeal is heard and determined." 85

The subject index serves as the brief’s table of contents.  Instead of "[thumbing] through the
86

[appellant’s brief]"  every time the Court of Appeals Justice encounters an argument or citation, the
87

Justice deciding the case only has to refer to the subject index for the argument or citation he or she
needs.  This saves the Court ofAppeals time in reviewing the appealed case. Efficiency allows the
88

justices of the appellate court to substantially attend to this case as well as other cases.

Page references to the record guarantee that the facts stated in the appellant’s brief are supported
by the record.  Astatement of fact without a page reference to the record creates the presumption
89

that it is unsupported by the record and, thus, "may be stricken or disregarded altogether." 90

As for the table of cases, textbooks, and statutes cited, this is required so that the Court of Appeals
can easily verify the authorities cited "for accuracy and aptness." 91

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record, and a table
of cases, textbooks, and statutes cited. These requirements "were designed to assist the appellate
court in the accomplishment of its tasks, and, overall, to enhance the orderly administration of
justice."  This court will not disregard rules on appeal "in the guise of liberal construction."  For this
92 93

court to liberally construe the Rules, the party must substantially comply with the Rules and correct
its procedural lapses.  Lui Enterprises failed to remedy these errors.
94

All told, the Court of Appeals did not err in dismissing Lui Enterprises’ appeal. It failed to comply with
Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil Procedure on the
required contents of the appellant’s brief.

II

Lui Enterprises failed to show that its failure to answer the complaint within the required
period was due to excusable negligence

When a defendant is served with summons and a copy of the complaint, he or she is required to
answer within 15 days from the day he or she was served with summons.  The defendant may also
95

move to dismiss the complaint "[w]ithin the time for but before filing the answer." 96

Fifteen days is sufficient time for a defendant to answer with good defenses against the plaintiff’s
allegations in the complaint. Thus, a defendant who fails to answer within 15 days from service of
summons either presents no defenses against the plaintiff’s allegations in the complaint or was
prevented from filing his or her answer within the required period due to fraud, accident, mistake or
excusable negligence. 97

In either case, the court may declare the defendant in default on plaintiff’s motion and notice to
defendant.  The court shall then try the case until judgment without defendant’s participation  and
98 99

grant the plaintiff such relief as his or her complaint may warrant. 100

265 | P a g e
A defendant declared in default loses his or her standing in court.  He or she is "deprived of the right
101

to take part in the trial and forfeits his [or her] rights as a party litigant,"  has no right "to present
102

evidence [supporting his or her] allegations,"  and has no right to "control the proceedings [or]
103

cross-examine witnesses."  Moreover, he or she "has no right to expect that [the court] would [act]
104

upon [his or her pleadings]"  or that he or she "may [oppose]motions filed against him [or her]."
105 106

However, the defendant declared in default "does not [waive] all of [his or her] rights."  He or she
107

still has the right to "receive notice of subsequent proceedings."  Also, the plaintiff must still present
108

evidence supporting his or her allegations "despite the default of [the defendant]." 109

Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer
to the complaint. For a defendant without good defenses, default saves him or her "the
embarrassment of openly appearing to defend the indefensible."  As this court explained
110

in Gochangco v. The Court of First Instance of Negros Occidental, Branch

IV:
111

It does make sense for a defendant without defenses, and who accepts the correctness of
the specific relief prayed for in the complaint, to forego the filing of the answer or any sort of
intervention in the action at all. For even if he did intervene, the result would be the same: since he
would be unable to establish any good defense, having none in fact, judgment would inevitably go
against him. And this would be an acceptable result, if not being in his power to alter or prevent it,
provided that the judgment did not go beyond or differ from the specific relief stated in the complaint.
x x x.  (Emphasis in the original)
112

On the other hand, for a defendant with good defenses, "it would be unnatural for him [or her] not to
set x x x up [his or her defenses] properly and timely."  Thus, "it must be presumed that some
113

insuperable cause prevented him [or her] from [answering the complaint]."  In which case, his or her
114

proper remedy depends on when he or she discovered the default and whether the default judgment
was already rendered by the trial court.

After notice of the declaration of default but before the court renders the default judgment, the
defendant may file, under oath, a motion to set aside order of default. The defendant must properly
show that his or her failure to answer was due to fraud, accident,  mistake  or excusable
115 116

negligence.  The defendant must also have a meritorious defense. Rule 9, Section 3, paragraph (b)
117

of the1997 Rules of Civil Procedure provides:

Section 3. Default; declaration of. – x x x x

(b) Relief from order of default. – A party declared in default may at any time after notice thereof and
before judgment file a motion under oath to set aside the order of default upon proper showing that
his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may be set aside on such terms and
conditions as the judge may impose in the interest of justice.

If the defendant discovers his or her default after judgment but prior to the judgment becoming final
and executory, he or she may file a motion for new trial under Rule 37, Section 1, paragraph (a) of
the 1997 Rules of Civil Procedure.  If he or she discovers his or her default after the judgment has
118

become final and executory, a petition for relief from judgment under Rule 38, Section 1 of the 1997
Rules of Civil Procedure may be filed. 119

266 | P a g e
Appeal is also available to the defendant declared in default. He or she may appeal the judgment for
being contrary to the evidence or to the law under Rule 41, Section 2 of the 1997 Rules of Civil
Procedure.  He or she may do so even if he or she did not file a petition to set aside order of
120

default.121

A petition for certiorari may also be filed if the trial court declared the defendant in default with grave
abuse of discretion. 122

The remedies of the motion to set aside order of default, motion for new trial, and petition for relief
from judgment are mutually exclusive, not alternative or cumulative. This is to compel defendants to
remedy their default at the earliest possible opportunity. Depending on when the default was
discovered and whether a default judgment was already rendered, a defendant declared in default
may avail of onlyone of the three remedies.

Thus, if a defendant discovers his or her default before the trial court renders judgment, he or she
shall file a motion to set aside order of default. If this motion to set aside order of default is denied,
the defendant declared in default cannot await the rendition of judgment, and he or she cannot file a
motion for new trial before the judgment becomes final and executory, or a petition for relief from
judgment after the judgment becomes final and executory.

Also, the remedies against default become narrower and narrower as the trial nears judgment. The
defendant enjoys the most liberality from this court with a motion to set aside order of default, as he
or she has no default judgment to contend with, and he or she has the whole period before judgment
to remedy his or her default.

With a motion for new trial, the defendant must file the motion within the period for taking an
appeal  or within 15 days from notice of the default judgment. Although a default judgment has
123

already been rendered, the filing of the motion for new trial tolls the reglementary period of appeal,
and the default judgment cannot be executed against the defendant.

A petition for relief from judgment is filed after the default judgment has become final and executory.
Thus, the filing of the petition for relief from judgment does not stay the execution of the default
judgment unless a writ of preliminary injunction is issued pending the petition’s resolution. 124

Upon the grant of a motion to set aside order of default, motion for new trial, or a petition for relief
from judgment, the defendant is given the chance to present his or her evidence against that of
plaintiff’s. With an appeal, however, the defendant has no right to present evidence on his or her
behalf and can only appeal the judgment for being contrary to plaintiff’s evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to present evidence on his
or her behalf. The defendant can only argue that the trial court committed grave abuse of discretion
in declaring him or her in default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a
motion to set aside order of default, motion for new trial, or a petition for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial Court of Makati
rendered judgment. Thus, it timely filed a motion to set aside order of default, raising the ground of
excusable negligence.

267 | P a g e
Excusable negligence is "one which ordinary diligence and prudence could not have guarded
against."  The circumstances should be properly alleged and proved. In this case, we find that Lui
125

Enterprises’ failure to answer within the required period is inexcusable.

Lui Enterprises’ counsel filed its motion to dismiss four days late. It did not immediately take steps to
remedy its default and took one year from discovery of default to file a motion to set aside order of
default. In its motion to set aside order of default, Lui Enterprises only "conveniently blamed its x x x
counsel [for the late filing of the answer]"  without offering any excuse for the late filing. This is not
126

excusable negligence under Rule 9, Section 3, paragraph (b)  of the 1997 Rules of Civil Procedure.
127

Thus, the Regional Trial Court of Makati did not err in refusing to set aside the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been liberal in setting
aside its order of default. After it had been declared in default, Lui Enterprises filed several
manifestations informing the Makati trial court of the earlier filed nullification of deed of dation in
payment case which barred the filing of the interpleader case. Lui Enterprises’ president, Eli L. Lui,
and counsel even flew in from Davao to Makati to "formally [manifest that] a [similar] action between
[Lui Enterprises] and [the Philippine Bank of Communications]"  was already pending in the
128

Regional Trial Court of Davao. However, the trial court did not recognize Lui Enterprises’standing
incourt.

The general rule is that courts should proceed with deciding cases on the merits and set aside
orders of default as default judgments are "frowned upon."  As much as possible, cases should be
129

decided with both parties "given every chance to fight their case fairly and in the open, without resort
to technicality."
130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil
Procedure must first be complied with.  The defendant’s motion to set aside order of default must
131

satisfy three conditions. First is the time element. The defendant must challenge the default order
before judgment. Second, the defendant must have been prevented from filing his answer due to
fraud, accident, mistake or excusable negligence. Third, he must have a meritorious defense. As this
court held in SSS v. Hon. Chaves: 132

Procedural rules are not to be disregarded or dismissed simply because their non-observance may
have resulted in prejudice to a party’s substantive rights. Like all rules[,] they are to be followed,
except only when for the most persuasive of reasons they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed. x x x. 133

As discussed, Lui Enterprises never explained why its counsel failed to file the motion to dismiss on
time. It just argued that courts should be liberal in setting aside orders of default. Even assuming that
it had a meritorious defense and that its representative and counsel had to fly in from Davao to
Makati to personally appear and manifest in court its meritorious defense, Lui Enterprises must first
show that its failure to answer was due to fraud, accident, mistake or excusable negligence. This Lui
Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui Enterprises and
the Philippine Bank of Communications to litigate their claims. Thus, "[d]eclaring the other claimant
in default would ironically defeat the very purpose of the suit."  The RegionalTrial Court of Makati
134

should not have declared Lui Enterprises in default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil
action for interpleader if conflicting claims are made against him or her over a subject matter in

268 | P a g e
which he or she has no interest. The action is brought against the claimants to compel them to
litigate their conflicting claims among themselves. Rule 62, Section 1 of the 1997 Rules of Civil
Procedure provides:

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed bythe claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.

An interpleader complaint may be filed by a lessee against those who have conflicting claims over
the rent due for the property leased.  This remedy is for the lessee to protect him or her from
135

"double vexation in respect of one liability."  He or she may file the interpleader case to extinguish
136

his or her obligation to pay rent, remove him or her from the adverse claimants’dispute, and compel
the parties with conflicting claims to litigate among themselves.

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. Its
purpose in filing the interpleader case "was not defeated"  when the Makati trial court declared Lui
137

Enterprises in default.

At any rate, an adverse claimant in an interpleader case may be declared in default. Under Rule 62,
Section 5 of the 1997 Rules of Civil Procedure, a claimant who fails to answer within the required
period may, on motion, be declared in default. The consequence of the default is that the court may
"render judgment barring [the defaulted claimant] from any claim in respect to the subject
matter."  The Rules would not have allowed claimants in interpleader cases to be declared in
138

default if it would "ironically defeat the very purpose of the suit."

139

The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to answer the
complaint within the required period. Lui Enterprises filed a motion to set aside order of default
without an acceptable excuse why its counsel failed to answer the complaint. It failed to prove the
excusable negligence. Thus, the Makati trial court did not err in refusing to set aside the order of
default.

III

The nullification of deed in dation in payment case did not bar the filing of the interpleader
case. Litis pendentia is not present in this case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the Regional Trial
Court of Davao. It sought to nullify the deed of dation in payment through which the Philippine Bank
of Communications acquired title over the leased property. Lui Enterprises argued that this pending
nullification case barred the Regional Trial Court of Makati from hearing the interpleader case. Since
the interpleader case was filed subsequently to the nullification case, the interpleader case should
be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion to dismiss
may be filed on the ground of litis pendentia:

Section 1. Grounds. – Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

269 | P a g e
 xxxx

(e)That there is another action pending between the same parties for the same cause;

xxxx

Litis pendentia is Latin for "a pending suit."  It exists when "another action is pending between the
140

same parties for the same cause of actionx x x."  The subsequent action is "unnecessary and
141

vexatious"  and is instituted to "harass the respondent [in the subsequent action]."
142 143

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same interest in both actions;

(2)Identity of rights asserted and reliefs prayed for, the reliefs being founded on the same
facts; and

(3)The identity in the two cases should be such that the judgment that may be rendered in
one would, regardless of which party is successful, amount to res judicata in the other. 144

All of the requisites must be present.  Absent one requisite, there is no litis pendentia.
145 146

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed
of dation in payment case and the interpleader case. Zuellig Pharma is not a party to the nullification
case filed in the Davao trial court.

There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises filed the first case
to nullify the deed of dation in payment it executed in favor of the Philippine Bank of
Communications. Zuellig Pharma subsequently filed the interpleader case to consign in court the
rental payments and extinguish its obligation as lessee. The interpleader case was necessary and
was not instituted to harass either Lui Enterprises or the Philippine Bank of Communications.

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals  as authority to
147

set aside the subsequently filed interpleader case. In this cited case, petitioner Progressive
Development Corporation, Inc. entered into a lease contract with Westin Seafood Market, Inc. The
latter failed to pay rent. Thus, Progressive Development Corporation, Inc. repossessed the leased
premises, inventoried the movable properties inside the leased premises, and scheduled the public
sale of the inventoried properties as they agreed upon in their lease contract.

Westin Seafood Market, Inc. filed for forcible entry with damages against Progressive Development
Corporation, Inc. It subsequently filed an action for damages against Progressive Development
Corporation for its "forcible takeover of the leased premises." 148

This court ordered the subsequently filed action for damages dismissed as the pending forcible entry
with damages case barred the subsequently filed damages case.

Progressive Development Corporation, Inc. does not apply in this case. The action for forcible entry
with damages and the subsequent action for damages were filed by the same plaintiff against the
same defendant. There is identity of parties in both cases.

270 | P a g e
In this case, the nullification of deed of dation in payment case was filed by Lui Enterprises against
the Philippine Bank of Communications. The interpleader case was filed by Zuellig Pharma against
Lui Enterprises and the Philippine Bank of Communications. A different plaintiff filed the interpleader
case against Lui Enterprises and the Philippine Bank of Communications. Thus, there is no identity
of parties, and the first requisite of litis pendentia is absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment to recover
ownership of the leased premises. Zuellig Pharma filed the interpleader case to extinguish its
obligation to pay rent.There is no identity of reliefs prayed for, and the second requisite of litis
pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation in payment case
did not bar the filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of preliminary injunction
against the Regional Trial Court of Makati. The Regional Trial Court of Davao allegedly enjoined the
Regional Trial Court of Makati from taking cognizance of the interpleader case. Lui Enterprises
argued that the Regional Trial Court of Makati "should have respected the orders issued by the
Regional Trial Court of Davao."  Lui Enterprises cited Compania General de Tabacos de Filipinas v.
149

Court of Appeals  where this court allegedly held:

150

x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to enjoin Branch 9
of the RTC of Manila from proceeding with the foreclosure case but also has the effect of pre-
empting the latter’s orders. x x x. 151

Compania General de Tabacos de Filipinas is not an authority for the claim that a court can issue a
writ of preliminary injunction against a co- equal court.  The cited sentence was taken out of context.
1âwphi1

In Compania General de Tabacos de Filipinas, this court held that the Regional Trial Court ofAgoo
had no power to issue a writ of preliminary injunction against the Regional Trial Court of
Manila.  Acourt cannot enjoin the proceedings of a co-equal court.
152

Thus, when this court said that the Regional Trial Court of Agoo’s writ of preliminary injunction "not
only seeks to enjoin x x x [the Regional Trial Court of Manila] from proceeding with the foreclosure
case but also has the effect of pre-empting the latter’s orders,"  this court followed with "[t]his we
153

cannot countenance." 154

At any rate, the Regional Trial Court of Davao’s order datedApril 18, 2005 was not a writ of
preliminary injunction. It was a mere order directing the Philippine Bank of Communications to inform
Zuellig Pharma to pay rent to Lui Enterprises while the status quo order between Lui Enterprises and
the Philippine Bank of Communications was subsisting. The Regional Trial Court of Davao did not
enjoin the proceedings before the Regional Trial Court of Makati.The order datedApril 18, 2005
provides:

As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith inform Zuellig
Pharma Corp., of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order,
and consequently, for the said lessee to remit all rentals due from February 23, 2003 and onwards to
plaintiff Lui Enterprises, Inc., in the meanwhile that the status quo order is subsisting. 155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of Makati
fromhearing the interpleader case.

271 | P a g e
All told, the trial court did not err in proceeding with the interpleader case. The nullification of deed of
dation in payment case pending with the Regional Trial Court of Davao did not bar the filing of the
interpleader case with the RegionalTrial Court of Makati.

IV

The Court of Appeals erred in awarding attorney’s fees

In its ordinary sense, attorney’s fees "represent the reasonable compensation [a client pays his or
her lawyer] [for legal service rendered]."  In its extraordinary sense, attorney’s fees "[are] awarded x
156

x x as indemnity for damages [the losing party pays the prevailingparty]." 157

The award of attorney’s fees is the exception rather than the rule.  It is not awarded to the prevailing
158

party "as a matter of course."  Under Article 2208 of the Civil Code, attorney’s fees cannot be
159

recovered in the absence of stipulation, except under specific circumstances:

(1)When exemplary damages are awarded;

(2)When the defendant’s act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

(3)In criminal cases of malicious prosecution against the plaintiff;

(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8)In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9)In a separate civil action to recover civil liability arising froma crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered. 160

Even if a party is "compelled to litigate with third persons or to incur expenses to protect his [or her]
rights,"  attorney's fees will not be awarded if no bad faith "could be reflected in a party's
161

persistence in a case." 162

To award attorney's fees, the court must have "factual, legal, [and] equitable justification."  The
163

court must state the award's basis in its decision. These rules are based on the policy that "no
164

premium should be placed.on the right to litigate." 165

272 | P a g e
In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma] was compelled to
litigate with third persons or to incur expenses to protect [its] interest[s]."  This is not a compelling
166

reason to award attorney's fees. That Zuellig Pharma had to file an interpleader case to consign its
rental payments did not mean that Lui Enterprises was in bad faith in insisting that rental payments
be paid to it. Thus, the Court. of Appeals erred in awarding attorney's fees to Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Court of
Appeals' decision and resolution in CA- G.R. CV No. 88023 are AFFIRMED with MODIFICATION.
The award of PS0,000.00 attorney's fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.

273 | P a g e
G.R. Nos. 154470-71               September 24, 2012

BANK OF COMMERCE, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent.

x-----------------------x

G.R. Nos. 154589-90

BANGKO SENTRAL NG PILIPINAS, Petitioner,

vs.
PLANTERS DEVELOPMENT BANK, Respondent.

DECISION

BRION, J.:

Before the Court are two consolidated petitions for review on certiorari under Rule 45, on pure
1 

questions of law, filed by the petitioners Bank of Commerce (BOC) and the Bangko Sentral ng
Pilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the
Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254.
These orders dismissed (i) the petition filed by the Planters Development Bank (PDB), (ii) the
"counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed
bythe BSP; and denied the BOC’s and the BSP’s motions for reconsideration.

THE ANTECEDENTS

The Central Bank bills

I. First set of CB bills

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central
Bank (CB) bills with a total face value of ₱ 70 million, issued on January 2, 1994 and would mature
on January 2, 1995. As evidenced by a "Detached Assignment" dated April 8, 1994, the RCBC sold
2  3 

these CB bills to the BOC. As evidenced by another "Detached Assignment" of even date, the BOC,
4  5 

in turn, sold these CB bills to the PDB. The BOC delivered the Detached Assignments to the PDB.
6  7

On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth ₱ 70
million, with maturity date of June 29, 1994, as evidenced by a Trading Order and a Confirmation of
8 

Sale. However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the
9 

BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 06-
29-94" – referring to the Treasury Bills. Nevertheless, the PDB retained possession of the Detached
10 

Assignments. It is basically the nature of this April 15 transaction that the PDB and the BOC cannot
agree on.

The transfer of the first set of seven CB bills

i. CB bill nos. 45351-53

274 | P a g e
On April 20, 1994, according to the BOC, it "sold back" to the PDB three of the seven CB bills. In
11 

turn, the PDB transferred these three CB bills to Bancapital Development Corporation (Bancap). On
April 25, 1994, the BOC bought the three CB bills from Bancap – so, ultimately, the BOC reacquired
these three CB bills, particularly described as follows:
12 

Serial No.: 2BB XM 045351

2BB XM 045352
2BB XM 045353

Quantity: Three (3)

Denomination: Php 10 million

Total Face Value: Php 30 million

ii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation which transferred them to All-Asia Capital and Trust Corporation (All Asia). On
13 

September 30, 1994, All Asia further transferred the four CB bills back to the RCBC. 14

On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP
refused to release the amount of this CB bill on maturity, the BOC purchased from All Asia this lone
CB bill, particularly described as follows:
15  16

Serial No.: 2BB XM 045348

Quantity: One (1)

Denomination: Php 10 million

Total Face Value: Php 10 million

As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and
Insular Savings Bank. Again, when the BSP refused to release the amount of this CB bill on
maturity, the RCBC paid back its transferees, reacquired these three CB bills and sold them to the
BOC – ultimately, the BOC acquired these three CB bills.

All in all, the BOC acquired the first set of seven CB bills.

II. Second set of CB bills

On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of ₱
20 million to the PDB and (ii) delivered to the PDB the corresponding Detached Assignment. The17 

two CB bills were particularly described as follows:

275 | P a g e
 Serial No.: BB XM 045373
BB XM 045374

Issue date: January 3, 1994

Maturity date: January 2, 1995

Denomination: Php 10 million

Total Face value: Php 20 million

On even date, the PDB delivered to Bancap the two CB bills (April 19 transaction). In turn, Bancap
18 

sold the CB bills to Al-Amanah Islamic Investment Bank of the Philippines, which in turn sold it to the
BOC. 19

PDB’s move against the transfer of

the first and second sets of CB bills

On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB informed the
20 

Officer-in-Charge of the BSP’s Government Securities Department, Lagrimas Nuqui, of the PDB’s
21 

claim over these CB bills, based on the Detached Assignments in its possession. The PDB
requested the BSP to record its claim in the BSP’s books, explaining that its non-possession of the
22 

CB bills is "on account of imperfect negotiations thereof and/or subsequent setoff or transfer." 23

Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open
Market Operations, Stabilization of the Securities Market, Issue, Servicing and Redemption of the
Public Debt) which requires the presentation of the bond before a registered bond may be
24 

transferred on the books of the BSP. 25

In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB
Bills…. rather it intends to put the BSP on formal notice that whoever is in possession of said bills is
not a holder in due course," and, therefore the BSP should not make payment upon the presentation
of the CB bills on maturity. Nuqui responded that the BSP was "not in a position at that point in time
26 

to determine who is and who is not the holder in due course since it is not privy to all acts and time
involving the transfers or negotiation" of the CB bills. Nuqui added that the BSP’s action shall be
governed by CB Circular No. 28, as amended. 27

On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a
notation in the BSP’s books be made against the transfer, exchange, or payment of the bonds and
the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to
submit proof as a holder in due course (of the first set of CB bills). The PDB relied on Section 10 (d)
4 of CB Circular No. 28. This provision reads:
28 

(4) Assignments effected by fraud – Where the assignment of a registered bond is secured by
fraudulent representations, the Central Bank can grant no relief if the assignment has been honored
without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the assignment is
claimed to have been secured by fraudulent representations, or payment of the bond the payment of
interest thereon, and when the bond is presented, will call upon the owner and the person presenting
the bond to substantiate their respective claims.If it then appears that the person presenting the

276 | P a g e
bond stands in the position of bonafide holder for value, the Central Bank, after giving the owner an
opportunity to assert his claim, will pass the bond for transfer, exchange or payments, as the case
may be, without further question.

In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSP’s previous stand.

In light of these BSP responses and the impending maturity of the CB bills, the PDB filed with the
29 

RTC two separate petitions for Mandamus, Prohibition and Injunction with prayer for Preliminary
Injunction and Temporary Restraining Order, docketed as Civil Case No. 94-3233 (covering the first
set of CB bills) and Civil Case 94-3254 (covering the second set of CB bills) against Nuqui, the BSP
and the RCBC. 30

The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills)
and the April 19 transaction (involving the second set of CB bills), there was no intent on its part to
transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the
BOC and Bancap, respectively. The PDB particularly alleges that it merely "warehoused" the first31 

set of CB bills with the BOC, as security collateral.

On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face
value of the CB bills on maturity. On January 10, 1995, the PDB filed an Amended Petition,
32 

additionally impleading the BOC and All Asia. In a January 13, 1995 Order, the cases were
33 

consolidated. On January 17, 1995, the RTC granted the PDB’s application for a writ of preliminary
34 

prohibitory injunction. In both petitions, the PDB identically prayed:

35 

WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the Writs of
Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and Nuqui, or whoever
may take her place -

(a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB Bills in
accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and

(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x x x
PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever will present
the [first and second sets of] CB Bills for payment, to submit proof as to who stands as the holder in
due course of said bills, and, thereafter, act accordingly;

and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the following:

(a) the sum of ₱ 100,000.00, as and for exemplary damages;

(b) the sum of at least ₱ 500,000.00, or such amount as shall be proved at the trial, as and
for attorney’s fees;

(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and

(d) the costs of suit. 36

After the petitions were filed, the BOC acquired/reacquired all the nine CB bills – the first and second
sets of CB bills (collectively, subject CB bills).

277 | P a g e
Defenses of the BSP and of the BOC 37

The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has no
cause of action against it since the PDB is no longer the owner of the CB bills. Contrary to the PDB’s
"warehousing theory," the BOC asserted that the (i) April 15 transaction and the (ii) April 19
38 

transaction – covering both sets of CB bills - were valid contracts of sale, followed by a transfer of
title (i) to the BOC (in the April 15 transaction) upon the PDB’s delivery of the 1st set of CB bills in
substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19
transaction) upon the PDB’s delivery of the 2nd set of CB bills to Bancap, likewise by way of
substitution.

The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDB’s case because
(i) the PDB is not in possession of the CB bills and (ii) the BOC acquired these bills from the PDB, as
to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value.
The BOC also asserted a compulsory counterclaim for damages and attorney’s fees.

On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular
No. 28 because this section applies only to an "owner" and a "person presenting the bond," of which
the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills,
duly recorded in the BSP’s books, in its favor to clothe it with the status of an "owner." According to
39 

the BSP –

Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x
x x are required to be recorded/registered in BSP’s books. In this regard, Section 4 a. (1) of CB
Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly
executed by the registered owner or his duly authorized representative x x x and duly recorded on
the books of the Central Bank."

xxxx

The alleged assignment of subject CB Bills in PDB’s favor is not recorded/registered in BSP’s
books. (underscoring supplied)
40 

Consequently, when Nuqui and the BSP refused the PDB’s request (to record its claim), they were
merely performing their duties in accordance with CB Circular No. 28.

Alternatively, the BSP asked that an interpleader suit be allowed between and among the claimants
to the subject CB bills on the position that while it is able and willing to pay the subject CB bills’ face
value, it is duty bound to ensure that payment is made to the rightful owner. The BSP prayed that
judgment be rendered:

a. Ordering the dismissal of the PDB’s petition for lack of merit;

b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled
to the ownership of the subject CB bills and the proceeds thereof;

c. x x x;

d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary
damages… as the RTC may deem warranted; and

278 | P a g e
 e. Ordering PDB to pay Nuqui moral damages… and to pay the costs of the suit. 41

Subsequent events

The PDB agreed with the BSP’s alternative response for an interpleader –

4. PDB agrees that the various claimants should now interplead and substantiate their respective
claims on the subject CB bills. However, the total face value of the subject CB bills should be
deposited in escrow with a private bank to be disposed of only upon order of the RTC. 42

Accordingly, on June 9, 1995 and August 4, 1995, the BOC and the PDB entered into two separate
43  44 

Escrow Agreements. The first agreement covered the first set of CB bills, while the second
45 

agreement covered the second set of CB bills. The parties agreed to jointly collect from the BSP the
maturity proceeds of these CB bills and to deposit said amount in escrow, "pending final
determination by Court judgment, or amicable settlement as to who shall be eventually entitled
thereto." The BOC and the PDB filed a Joint Motion, submitting these Escrow Agreements for court
46  47 

approval. The RTC gave its approval to the parties’ Joint Motion. Accordingly, the BSP released the
48 

maturity proceeds of the CB bills by crediting the Demand Deposit Account of the PDB and of the
BOC with 50% each of the maturity proceeds of the amount in escrow. 49

In view of the BOC’s acquisition of all the CB bills, All Asia moved to be dropped as a respondent
50 

(with the PDB’s conformity ), which the RTC granted. The RCBC subsequently followed suit.
51  52  53

In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention
regarding the case and to inform the court of any amicable settlement; "otherwise, th[e] case shall be
dismissed for lack of interest." Complying with the RTC’s order, the BOC moved (i) that the case be
54 

set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and
the PDB, particularly on "who has a better right over the subject CB bills." The PDB joined the BOC
55 

in its motion. 56

On September 28, 2000, the RTC granted the BSP’s motion to interplead and, accordingly, required
the BOC to amend its Answer and for the conflicting claimants to comment thereon. In October
57 

2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its
earlier arguments asserting ownership over the subject CB bills. 58

In the alternative, the BOC added that even assuming that there was no effective transfer of the nine
CB bills ultimately to the BOC, the PDB remains obligated to deliver to the BOC, as buyer in the April
15 transaction and ultimate successor-in-interest of the buyer (Bancap) in the April 19 transaction,
either the original subjects of the sales or the value thereof, plus whatever income that may have
been earned during the pendency of the case. 59

That BOC prayed:

1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to
the proceeds thereof as well as all income earned pursuant to the two (2) Escrow
Agreements entered into by BOC and PDB.

2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or
the value thereof and whatever income earned by way of interest at prevailing rate.

279 | P a g e
Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted the 60 

BOC’s Amended Consolidated Answer with Compulsory Counterclaims.

In May 2001, the PDB filed an Omnibus Motion, questioning the RTC’s jurisdiction over the BOC’s
61 

"additional counterclaims." The PDB argues that its petitions pray for the BSP (not the RTC) to
determine who among the conflicting claimants to the CB bills stands in the position of the bona fide
holder for value. The RTC cannot entertain the BOC’s counterclaim, regardless of its nature,
because it is the BSP which has jurisdiction to determine who is entitled to receive the proceeds of
the CB bills.

The BOC opposed the PDB’s Omnibus Motion. The PDB filed its Reply.
62  63

In a January 10, 2002 Order, the RTC dismissed the PDB’s petition, the BOC’s counterclaim and the
BSP’s counter-complaint/cross-claim for interpleader, holding that under CB Circular No. 28, it has
no jurisdiction (i) over the BOC’s "counterclaims" and (ii) to resolve the issue of ownership of the CB
bills. With the denial of their separate motions for Reconsideration, the BOC and the BSP
64  65 

separately filed the present petitions for review on certiorari.

66

THE BOC’S and THE BSP’S PETITIONS

The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of
CB Circular No. 28, which contemplates only of three situations: first, where the fraudulent
assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the
fraudulent assignment is coupled with a notice of fraud to the BSP, it will make a notation against the
assignment and require the owner and the holder to substantiate their claims; and third, where the
case does not fall on either of the first two situations, the BSP will have to await action on the
assignment pending settlement of the case, whether by agreement or by court order.

The PDB’s case cannot fall under the first two situations. With particular regard to the second
situation, CB Circular No. 28 requires that the conflict must be between an "owner" and a "holder,"
for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here
refers to the registered owner giving notice of the fraud to the BSP. The PDB, however, is not the
registered owner nor is it in possession (holder) of the CB bills. Consequently, the PDB’s case can
67 

only falls under the third situation which leaves the RTC, as a court of general jurisdiction, with the
authority to resolve the issue of ownership of a registered bond (the CB bills) not falling in either of
the first two situations.

The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is
to have a reliable system to protect the registered owner; should he file a notice with the BSP about
a fraudulent assignment of certain CB bills, the BSP simply has to look at its books to determine who
is the owner of the CB bills fraudulently assigned. Since it is only the registered owner who complied
with the BSP’s requirement of recording an assignment in the BSP’s books, then "the protective
mantle of administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circular’s requirement, like the PDB. 68

Assuming arguendo that the PDB’s case falls under the second situation – i.e., the BSP has
jurisdiction to resolve the issue of ownership of the CB bills – the more recent CB Circular No. 769-
80 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already
superseded CB Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB
Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:

280 | P a g e
Assignment Affected by Fraud. – Any assignment for transfer of ownership of registered certificate
obtained through fraudulent representation if honored by the Central Bank or any of its authorized
service agencies shall not make the Central Bank or agency liable therefore unless it has previous
formal notice of the fraud. The Central Bank, upon notice under oath that the assignment was
secured through fraudulent means, shall immediately issue and circularize a "stop order" against the
transfer, exchange, redemption of the Certificate including the payment of interest coupons. The
Central Bank or service agency concerned shall continue to withhold action on the certificate until
such time that the conflicting claims have been finally settled either by amicable settlement between
the parties or by order of the Court.

Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSP’s authority to the mere issuance
and circularization of a "stop order" against the transfer, exchange and redemption upon sworn
notice of a fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action
until the dispute is ended by an amicable settlement or by judicial determination. Given the more
passive stance of the BSP – the very agency tasked to enforce the circulars involved - under CB
Circular No. 769-80, the RTC’s dismissal of the BOC’s counterclaims is palpably erroneous.

Lastly, since Nuqui’s office (Government Securities Department) had already been abolished, it can69 

no longer adjudicate the dispute under the second situation covered by CB Circular No. 28. The
abolition of Nuqui’s office is not only consistent with the BSP’s Charter but, more importantly, with
CB Circular No. 769-80, which removed the BSP’s adjudicative authority over fraudulent
assignments.

THE PDB’S COMMENT

The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by
the defenses set up in the answer. In filing the petition with the RTC, the PDB merely seeks to
70 

compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the
proceeds of the subject CB bills, which, as the PDB alleged, have been transferred through
fraudulent representations – an allegation which properly recognized the BSP’s jurisdiction to
resolve conflicting claims of ownership over the CB bills.

The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining
a controversy involving a question whose resolution demands the exercise of sound administrative
discretion. In the present case, the BSP’s special knowledge and experience in resolving disputes
on securities, whose assignment and trading are governed by the BSP’s rules, should be upheld.

The PDB counters that the BOC’s tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28
sanctions split jurisdiction which is not favored;but even this tri-fold interpretation which, in the
second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d)
4 aims to protect not just the registered owner but anyone who has been deprived of his bond by
fraudulent representation in order to deter fraud in the secondary trading of government securities.

The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuqui’s office does
not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-80 expressly provides that
CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the
BSP can always designate an office to resolve the PDB’s claim over the CB bills.

Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of
ownership of the CB bills, the RTC has not acquired jurisdiction over the BOC’s so-called
"compulsory" counterclaims (which in truth is merely "permissive") because of the BOC’s failure to

281 | P a g e
pay the appropriate docket fees. These counterclaims should, therefore, be dismissed and
expunged from the record.

THE COURT’S RULING

We grant the petitions.

At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB
Circular No. 769-80 as an issue. What the parties largely contest is the applicable circular in case of
an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the
proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB
bills.

Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by
requesting for the annotation of its claim over the subject CB bills in the BSP’s books), CB Circular
No. 769-80 has long been in effect. Therefore, the parties’ respective interpretations of the provision
of Section 10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established
that that Circular governs the resolution of their conflicting claims of ownership. This conclusion is
important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the
following provisions of CB Circular No. 769-80:

ARTICLE XI
SUPPLEMENTAL RULES

Section 1. Central Bank Circular No. 28 – The provisions of Central Bank Circular No. 28 shall have
suppletory application to matters not specially covered by these Rules.

ARTICLE XII
EFFECTIVITY

Effectivity – The rules and regulations herein prescribed shall take effect upon approval by the
Monetary Board, Central Bank of the Philippines, and all circulars, memoranda, or office orders
inconsistent herewith are revoked or modified accordingly. (Emphases added)

We agree with the PDB that in view of CB Circular No. 28’s suppletory application, an attempt to
harmonize the apparently conflicting provisions is a prerequisite before one may possibly conclude
that an amendment or a repeal exists. Interestingly, however, even the PDB itself failed to submit an
71 

interpretation based on its own position of harmonization.

The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No.
28; in fact, it even provided for the suppletory application of CB Circular No. 28 on "matters not
specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB
Circular No. 769-80 to operate as an implied repeal, or at least to amend earlier CB circulars, is
72 

supported by its text "revoking" or "modif[ying" "all circulars" which are inconsistent with its terms.

At the outset, we stress that none of the parties disputes that the subject CB bills fall within the
category of a certificate or evidence of indebtedness and that these were issued by the Central
Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the
subject CB bills should necessarily be governed by CB Circular No. 769-80. Even granting, however,
that reliance on CB Circular No. 769-80 alone is not enough, we find that CB Circular No. 769-80
impliedly repeals CB Circular No. 28.

282 | P a g e
An implied repeal transpires when a substantial conflict exists between the new and the prior laws.
In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old
laws. Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it
73 

is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and
patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to
know the existing law and would express a repeal if one is intended. 74

There are two instances of implied repeal. One takes place when the provisions in the two acts on
the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of
the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act
covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate
to repeal the earlier law. 75

A general reading of the two circulars shows that the second instance of implied repeal is present in
this case. CB Circular No. 28, entitled "Regulations Governing Open Market Operations,
Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation
governing the servicing and redemption of public debt, including the issue, inscription, registration,
transfer, payment and replacement of bonds and securities representing the public debt. On the
76 

other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank
Certificate of Indebtedness," is the governing regulation on matters (i) involving certificate of
77 

indebtedness issued by the Central Bank itself and (ii) which are similarly covered by CB Circular
78 

No. 28.

The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of
public debt, pursuant to Section 124 (now Section 119 of Republic Act R.A. No. 7653) of the old
Central Bank law which provides that "the servicing and redemption of the public debt shall also be
79 

effected through the Bangko Sentral." However, even as R.A. No. 7653 continued to recognize this
role by the BSP, the law required a phase-out of all fiscal agency functions by the BSP, including
Section 119 of R.A. No. 7653.

In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and
securities and Central Bank-issued evidence of indebtedness, given the present state of law, CB
Circular No. 28 and CB Circular No. 769-80 now operate on the same subject – Central Bank-issued
evidence of indebtedness. Under Section 1, Article XI of CB Circular No. 769-80, the continued
relevance and application of CB Circular No. 28 would depend on the need to supplement any
deficiency or silence in CB Circular No. 769-80 on a particular matter.

In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with a
course of action in case of an allegedly fraudulently assigned certificate of indebtedness. Under CB
Circular No. 28, in case of fraudulent assignments, the BSP would have to "call upon the owner and
the person presenting the bond to substantiate their respective claims" and, from there, determine
who has a better right over the registered bond. On the other hand, under CB Circular No. 769-80,
the BSP shall merely "issue and circularize a ‘stop order’ against the transfer, exchange, redemption
of the [registered] certificate" without any adjudicative function (which is the precise root of the
present controversy). As the two circulars stand, the patent irreconcilability of these two provisions
does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed
Section 10 (d) 4 of CB Circular No. 28.

The issue of BSP’s jurisdiction, lay hidden

283 | P a g e
On that note, the Court could have written finis to the present controversy by simply sustaining the
BSP’s hands-off approach to the PDB’s problem under CB Circular No. 769-80. However, the
jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the
matter of fraudulent assignment, has given rise to a question of jurisdiction - the core question of law
involved in these petitions - which the Court cannot just treat sub-silencio.

Broadly speaking, jurisdiction is the legal power or authority to hear and determine a cause. In the 80 

exercise of judicial or quasi-judicial power, it refers to the authority of a court to hear and decide a
case. In the context of these petitions, we hark back to the basic principles governing the question
81 

of jurisdiction over the subject matter.

First, jurisdiction over the subject matter is determined only by the Constitution and by law. As a 82 

matter of substantive law, procedural rules alone can confer no jurisdiction to courts or
administrative agencies. In fact, an administrative agency, acting in its quasi-judicial capacity, is a
83 

tribunal of limited jurisdiction and, as such, could wield only such powers that are specifically granted
to it by the enabling statutes. In contrast, an RTC is a court of general jurisdiction, i.e., it has
jurisdiction over cases whose subject matter does not fall within the exclusive original jurisdiction of
any court, tribunal or body exercising judicial or quasi-judicial functions.84

Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in
his answer but by the allegations in the complaint, irrespective of whether the plaintiff is entitled to
85  86 

favorable judgment on the basis of his assertions. The reason is that the complaint is supposed to
87 

contain a concise statement of the ultimate facts constituting the plaintiff's causes of action. 88

Third, jurisdiction is determined by the law in force at the time of the filing of the complaint. 89

Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP
can simply disown its jurisdiction, assuming it has, by the simple expedient of promulgating a new
circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent
with an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent
assignments of a certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB
Circular No. 28.

In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of
the law itself that gave CB Circular 769-80 its life and jurisdiction must be examined.

The Philippine Central Bank

On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a
corporate body with the primary objective of (i) maintaining the internal and external monetary
stability in the Philippines; and (ii) preserving the international value and the convertibility of the
peso. In line with these broad objectives, the Central Bank was empowered to issue rules and
90 

regulations "necessary for the effective discharge of the responsibilities and exercise of the powers
assigned to the Monetary Board and to the Central Bank." Specifically, the Central Bank is
91 

authorized to organize (other) departments for the efficient conduct of its business and whose
powers and duties "shall be determined by the Monetary Board, within the authority granted to the
Board and the Central Bank" under its original charter.
92 

With the 1973 Constitution, the then Central Bank was constitutionally made as the country’s central
monetary authority until such time that Congress shall have established a central bank. The 1987
93 

Constitution continued to recognize this function of the then Central Bank until Congress, pursuant to

284 | P a g e
the Constitution, created a new central monetary authority which later came to be known as the
Bangko Sentral ng Pilipinas.

Under the New Central Bank Act (R.A. No. 7653), the BSP is given the responsibility of providing
94 

policy directions in the areas of money, banking and credit; it is given, too, the primary objective of
maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of
promoting and maintaining monetary stability and convertibility of the peso. 95

The Constitution expressly grants the BSP, as the country’s central monetary authority, the power of
supervision over the operation of banks, while leaving with Congress the authority to define the
BSP’s regulatory powers over the operations of finance companies and other institutions performing
similar functions. Under R.A. No. 7653, the BSP’s powers and functions include (i) supervision over
the operation of banks; (ii) regulation of operations of finance companies and non-bank financial
institutions performing quasi banking functions; (iii) sole power and authority to issue currency within
the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts,
discounts, loans and advances to banking and other financial institutions to influence the volume of
credit consistent with the objective of achieving price stability; (vi) engaging in open market
operations; and (vii) acting as banker and financial advisor of the government. 1âwphi1

On the BSP’s power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The
General Banking Law of 2000) elaborates as follows:

CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL

SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;

4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory
powers over quasi-banks, trust entities and other financial institutions which under special laws are
subject to Bangko Sentral supervision. (2-Ca)

285 | P a g e
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act")
for purposes of relending or purchasing of receivables and other obligations. [emphasis ours]

While this provision empowers the BSP to oversee the operations and activities of banks to
"ascertain that laws and regulations are complied with," the existence of the BSP’s jurisdiction in the
present dispute cannot rely on this provision. The fact remains that the BSP already made known to
the PDB its unfavorable position on the latter’s claim of fraudulent assignment due to the latter’s own
failure to comply with existing regulations:
96 

In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or
accepted only upon previous notice to the Central Bank x x x." In fact, in a memo dated September
23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows:

In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as
amended) covering assignments of registered bonds, all banks and all concerned are enjoined to
observe strictly the pertinent provisions of said CB Circular as hereunder quoted:

xxxx

Under Section 10.b. (2)

x x x Detached assignment will be recognized or accepted only upon previous notice to the Central
Bank and its use is authorized only under the following circumstances:

(a) x x x

(b) x x x

(c) assignments of treasury notes and certificates of indebtedness in registered form which
are not provided at the back thereof with assignment form.

(d) Assignment of securities which have changed ownership several times.

(e) x x x

Non-compliance herewith will constitute a basis for non-action or withholding of action on

redemption/payment of interest coupons/transfer transactions or denominational exchange that may
be directly affected thereby. [Boldfacing supplied]

Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever
recorded in the BSP’s books. [Boldfacing supplied]

However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDB’s favor
despite the fact that the PDB already requested the BSP to record its assignment in the BSP’s books
as early as June 30, 1994. 97

The PDB’s claim is not accurate. What the PDB requested the BSP on that date was not the
recording of the assignment of the CB bills in its favor but the annotation of its claim over the CB bills
at the time when (i) it was no longer in possession of the CB bills, having been transferred from one

286 | P a g e
entity to another and (ii) all it has are the detached assignments, which the PDB has not shown to be
compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB cannot insist that the BSP take
cognizance of its plaint when the basis of the BSP’s refusal under existing regulation, which the PDB
is bound to observe, is the PDB’s own failure to comply therewith.

True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks).
The issue presented before the Court, however, does not concern the BSP’s supervisory power over
banks as this power is understood under the General Banking Law. In fact, there is nothing in the
PDB’s petition (even including the letters it sent to the BSP) that would support the BSP’s jurisdiction
outside of CB Circular No. 28, under its power of supervision, over conflicting claims to the proceeds
of the CB bills.

BSP has quasi-judicial powers over a

class of cases which does not include
the adjudication of ownership of the
CB bills in question

In United Coconut Planters Bank v. E. Ganzon, Inc., the Court considered the BSP as an
98 

administrative agency, exercising quasi-judicial functions through its Monetary Board. It held:
99 

A quasi-judicial agency or body is an organ of government other than a court and other than a
legislature, which affects the rights of private parties through either adjudication or rule-making. The
very definition of an administrative agency includes its being vested with quasi-judicial powers. The
ever increasing variety of powers and functions given to administrative agencies recognizes the
need for the active intervention of administrative agencies in matters calling for technical knowledge
and speed in countless controversies which cannot possibly be handled by regular courts. A "quasi-
judicial function" is a term which applies to the action, discretion, etc., of public administrative officers
or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings,
and draw conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and administrative autonomy, mandated
to provide policy directions in the areas of money, banking and credit. It has power to issue
subpoena, to sue for contempt those refusing to obey the subpoena without justifiable reason, to
administer oaths and compel presentation of books, records and others, needed in its examination,
to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act
No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its discretion
in determining whether administrative sanctions should be imposed on banks and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of investigation or
hearing regarding the same. [citations omitted]

The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant
to constitutional mandate, to carry out a particular governmental function. To be able to perform its
100  101 

role as central monetary authority, the Constitution granted it fiscal and administrative autonomy. In
general, administrative agencies exercise powers and/or functions which may be characterized as
administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as
may be conferred by the Constitution or by statute. 102

While the very nature of an administrative agency and the raison d'être for its creation and103 

proliferation dictate a grant of quasi-judicial power to it, the matters over which it may exercise this

287 | P a g e
power must find sufficient anchorage on its enabling law, either by express provision or by
necessary implication. Once found, the quasi-judicial power partakes of the nature of a limited and
special jurisdiction, that is, to hear and determine a class of cases within its peculiar competence
and expertise. In other words, the provisions of the enabling statute are the yardsticks by which the
Court would measure the quantum of quasi-judicial powers an administrative agency may exercise,
as defined in the enabling act of such agency. 104

Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on
the BSP on certain matters. For instance, under the situations contemplated under Section 36, par.
105 

2 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe manner)
106 

and Section 37 (where the bank or its officers willfully violate the bank’s charter or by-laws, or the
107 

rules and regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may place an entity
under receivership and/or liquidation or impose administrative sanctions upon the entity or its officers
or directors.

Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market
operations and thereby "issue, place, buy and sell freely negotiable evidences of indebtedness of the
Bangko Sentral" in the following manner.

SEC. 90. Principles of Open Market Operations. – The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective
of achieving price stability.

xxxx

SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. – In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe and in accordance with the
principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness
shall be made only in cases of extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international reserve of the Bangko Sentral or
against the securities which it has acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their
maturity, either through purchases in the open market or through redemptions at par and by lot if the
Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness
acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be
immediately retired and cancelled. (italics supplied; emphases ours)
108 

The primary objective of the BSP is to maintain price stability. The BSP has a number of monetary
109 

policy instruments at its disposal to promote price stability. To increase or reduce liquidity in the
financial system, the BSP uses open market operations, among others. Open market operation is a
110 

monetary tool where the BSP publicly buys or sells government securities from (or to) banks and
111 

financial institutions in order to expand or contract the supply of money. By controlling the money

288 | P a g e
supply, the BSP is able to exert some influence on the prices of goods and services and achieve its
inflation objectives.
112

Once the issue and/or sale of a security is made, the BSP would necessarily make a determination,
in accordance with its own rules, of the entity entitled to receive the proceeds of the security upon its
maturity. This determination by the BSP is an exercise of its administrative powers under the law as
113 

an incident to its power to prescribe rules and regulations governing open market operations to
achieve the "primary objective of achieving price stability." As a matter of necessity, too, the same
114 

rules and regulations facilitate transaction with the BSP by providing for an orderly manner of,
among others, issuing, transferring, exchanging and paying securities representing public debt.

Significantly, when competing claims of ownership over the proceeds of the securities it has issued
are brought before it, the law has not given the BSP the quasi-judicial power to resolve these
competing claims as part of its power to engage in open market operations. Nothing in the BSP’s
charter confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of
a subsequent transfer or assignment of evidence of indebtedness – a matter that appropriately falls
within the competence of courts of general jurisdiction. That the statute withholds this power from the
BSP is only consistent with the fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank supervisory functions. Thus, the BSP’s
assumption of jurisdiction over competing claims cannot find even a stretched-out justification under
its corporate powers "to do and perform any and all things that may be necessary or proper to carry
out the purposes" of R.A. No. 7653.  115

To reiterate, open market operation is a monetary policy instrument that the BSP employs, among
others, to regulate the supply of money in the economy to influence the timing, cost and availability
of money and credit, as well as other financial factors, for the purpose of stabilizing the price
level. What the law grants the BSP is a continuing role to shape and carry out the country’s
116 

monetary policy – not the authority to adjudicate competing claims of ownership over the securities it
has issued – since this authority would not fall under the BSP’s purposes under its charter.

While R.A. No. 7653 empowers the BSP to conduct administrative hearings and render judgment
117 

for or against an entity under its supervisory and regulatory powers and even authorizes the BSP
Governor to "render decisions, or rulings x x x on matters regarding application or enforcement of
laws pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as
regulations, policies or instructions issued by the Monetary Board," it is precisely the text of the
BSP’s own regulation (whose validity is not here raised as an issue) that points to the BSP’s limited
role in case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a ‘"stop
order" against the transfer, exchange, redemption of the certificate of indebtedness, including the
payment of interest coupons, and (ii) withholding action on the certificate.

A similar conclusion can be drawn from the BSP’s administrative adjudicatory power in cases of
"willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor." The118 

non-compliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a
party from any right to demand payment from the BSP.

In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations
which do not call for the exercise by the BSP of its supervisory or regulatory functions over entities
within its jurisdiction. 119

The fact alone that the parties involved are banking institutions does not necessarily call for the
exercise by the BSP of its quasi-judicial powers under the law. 120

289 | P a g e
The doctrine of primary jurisdiction
argues against BSP’s purported
authority to adjudicate ownership
issues over the disputed CB bills

Given the preceding discussions, even the PDB’s invocation of the doctrine of primary jurisdiction is
misplaced.

In the exercise of its plenary legislative power, Congress may create administrative agencies
endowed with quasi-legislative and quasi-judicial powers. Necessarily, Congress likewise defines the
limits of an agency’s jurisdiction in the same manner as it defines the jurisdiction of courts. As a
121 

result, it may happen that either a court or an administrative agency has exclusive jurisdiction over a
specific matter or both have concurrent jurisdiction on the same. It may happen, too, that courts and
agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One
of the instances when a court may properly defer to the adjudicatory authority of an agency is the
applicability of the doctrine of primary jurisdiction.
122

As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms:

6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes xxx ruled that Congress in
requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx
meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court
held that under the "sense-making and expeditious doctrine of primary jurisdiction ... the courts
cannot or will not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered." (emphasis ours)
123 

In Industrial Enterprises, Inc. v. Court of Appeals, the Court ruled that while an action for rescission
124 

of a contract between coal developers appears to be an action cognizable by regular courts, the trial
court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded
is "inextricably tied up with the right to develop coal-bearing lands and the determination of whether
or not the reversion of the coal operating contract over the subject coal blocks to [the plaintiff] would
be in line with the country’s national program and objective on coal-development and over-all coal-
supply-demand balance." It then applied the doctrine of primary jurisdiction –

In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in
many cases involving matters that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a particular case, which means that
the matter involved is also judicial in character. However, if the case is such that its determination
requires the expertise, specialized skills and knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a
claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed within the
special competence of an administrative body."

Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what
coal areas should be exploited and developed and which entity should be granted coal operating

290 | P a g e
contracts over said areas involves a technical determination by the Bureau of Energy Development
as the administrative agency in possession of the specialized expertise to act on the matter. The
Trial Court does not have the competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These issues
preclude an initial judicial determination. [emphases ours]

The absence of any express or implied statutory power to adjudicate conflicting claims of ownership
or entitlement to the proceeds of its certificates of indebtedness finds complement in the similar
absence of any technical matter that would call for the BSP’s special expertise or competence. In 125 

fact, what the PDB’s petitions bear out is essentially the nature of the transaction it had with the
subsequent transferees of the subject CB bills (BOC and Bancap) and not any matter more
appropriate for special determination by the BSP or any administrative agency.

In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged
with its execution is entitled to the greatest weight by the courts construing such rule or
regulation. While there are exceptions to this rule, the PDB has not convinced us that a departure
126  127 

is warranted in this case. Given the non-applicability of the doctrine of primary jurisdiction, the BSP’s
own position, in light of Circular No. 769-80, deserves respect from the Court.

Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action
invoking the jurisdiction of a court or administrative agency to resolve the substantive legal conflict
between the parties. In this sense, the present case is quite unique since the court’s jurisdiction was,
originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of
ownership over the CB bills - instead of obtaining a judicial determination of the same dispute.

The remedy of interpleader

Based on the unique factual premise of the present case, the RTC acted correctly in initially
assuming jurisdiction over the PDB’s petition for mandamus, prohibition and injunction. While the
128 

RTC agreed (albeit erroneously) with the PDB’s view (that the BSP has jurisdiction), it, however,
dismissed not only the BOC’s/the BSP’s counterclaims but the PDB’s petition itself as well, on the
ground that it lacks jurisdiction.

This is plain error.

Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of
jurisdiction. believes that jurisdiction over the BOC’s counterclaims and the BSP’s
129 

counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary
jurisdiction, the allowance of the PDB’s petition even becomes imperative because courts may raise
the issue of primary jurisdiction sua sponte. 130

Of the three possible options available to the RTC, the adoption of either of these two would lead the
trial court into serious legal error: first, if it granted the PDB’s petition, its decision would have to be
set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when
it dismissed the PDB’s petitions and the BOC’s counterclaims on the ground that it lacks jurisdiction,
the trial court seriously erred because precisely, the resolution of the conflicting claims over the CB
bills falls within its general jurisdiction.

Without emasculating its jurisdiction, the RTC could have properly dismissed the PDB’s petition but
on the ground that mandamus does not lie against the BSP; but even this correct alternative is no
longer plausible since the BSP, as a respondent below, already properly brought before the RTC the

291 | P a g e
remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for
interpleader. Section 1, Rule 62 of the Rules of Court provides when an interpleader is proper:

SECTION 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.

The remedy of an action of interpleader is designed to protect a person against double vexation in
131 

respect of a single liability. It requires, as an indispensable requisite, that conflicting claims upon the
7 

same subject matter are or may be made against the stakeholder (the possessor of the subject
matter) who claims no interest whatever in the subject matter or an interest which in whole or in part
is not disputed by the claimants. 132

Through this remedy, the stakeholder can join all competing claimants in a single proceeding to
determine conflicting claims without exposing the stakeholder to the possibility of having to pay more
than once on a single liability. 133

When the court orders that the claimants litigate among themselves, in reality a new action
arises, where the claims of the interpleaders themselves are brought to the fore, the stakeholder as
134 

plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader, when
proper, merely provides an avenue for the conflicting claims on the same subject matter to be
threshed out in an action. Section 2 of Rule 62 provides:

SEC. 2. Order. – Upon the filing of the complaint, the court shall issue an order requiring the
conflicting claimants to interplead with one another. If the interests of justice so require, the court
may direct in such order that the subject matter be paid or delivered to the court.

This is precisely what the RTC did by granting the BSP’s motion to interplead. The PDB itself
"agreed that the various claimants should now interplead." Thus, the PDB and the BOC
subsequently entered into two separate escrow agreements, covering the CB bills, and submitted
them to the RTC for approval.

In granting the BSP’s motion, the RTC acted on the correct premise that it has jurisdiction to resolve
the parties’ conflicting claims over the CB bills - consistent with the rules and the parties’ conduct -
and accordingly required the BOC to amend its answer and for the PDB to comment thereon.
Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC.
Swayed by the PDB’s argument, the RTC dismissed even the PDB’s petition - which means that it
did not actually compel the BSP to resolve the BOC’s and the PDB’s claims.

Without the motion to interplead and the order granting it, the RTC could only dismiss the PDB’s
petition since it is the RTC which has jurisdiction to resolve the parties’ conflicting claims – not the
BSP. Given that the motion to interplead has been actually filed, the RTC could not have really
granted the relief originally sought in the PDB’s petition since the RTC’s order granting the BSP’s
motion to interplead - to which the PDB in fact acquiesced into - effectively resulted in the dismissal
of the PDB’s petition. This is not altered by the fact that the PDB additionally prayed in its petition for
damages, attorney’s fees and costs of suit "against the public respondents" because the grant of the
order to interplead effectively sustained the propriety of the BSP’s resort to this procedural device.

Interpleader

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1. as a special civil action

What is quite unique in this case is that the BSP did not initiate the interpleader suit through an
original complaint but through its Answer. This circumstance becomes understandable if it is
considered that insofar as the BSP is concerned, the PDB does not possess any right to have its
claim recorded in the BSP’s books; consequently, the PDB cannot properly be considered even as a
potential claimant to the proceeds of the CB bills upon maturity. Thus, the interpleader was only an
alternative position, made only in the BSP’s Answer. 135

The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions
in Rule 62 of the Rules of Court and secondarily by the provisions applicable to ordinary civil
actions. Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as
136 

part of, although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation
to Section 1, Rule 9 of the Rules of Court does not include a complaint-in-interpleader as a
137 

claim, a form of defense, or as an objection that a defendant may be allowed to put up in his
138  139 

answer or in a motion to dismiss. This does not mean, however, that the BSP’s "counter-
complaint/cross-claim for interpleader" runs counter to general procedures.

Apart from a pleading, the rules allow a party to seek an affirmative relief from the court through
140  141 

the procedural device of a motion. While captioned "Answer with counter complaint/cross-claim for
interpleader," the RTC understood this as in the nature of a motion, seeking relief which essentially
142 

consists in an order for the conflicting claimants to litigate with each other so that "payment is made
to the rightful or legitimate owner" of the subject CB bills.
143 

The rules define a "civil action" as "one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong." Interpleader may be considered as a
stakeholder’s remedy to prevent a wrong, that is, from making payment to one not entitled to it,
thereby rendering itself vulnerable to lawsuit/s from those legally entitled to payment.

Interpleader is a civil action made special by the existence of particular rules to govern the
uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of Court, governing
ordinary civil actions, a party’s claim is asserted "in a complaint, counterclaim, cross-claim, third
(fourth, etc.)-party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim
is not required to be contained in any of these pleadings but in the answer-(of the conflicting
claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third party-
complaint) which is separately allowed under Section 5, par. 2 of Rule 62.

2. the payment of docket fees covering BOC’s counterclaim

The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of
the CB bills, the BOC’s failure to pay the appropriate docket fees prevents the RTC from acquiring
jurisdiction over the BOC’s "counterclaims."

We disagree with the PDB.

To reiterate and recall, the order granting the "PDB’s motion to interplead," already resulted in the
dismissal of the PDB’s petition. The same order required the BOC to amend its answer and for the
conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader.
Perhaps, by reason of the BOC’s denomination of its claim as a "compulsory counterclaim" and the
PDB’s failure to fully appreciate the RTC’s order granting the "BSP’s motion for interpleader" (with
the PDB’s conformity), the PDB mistakenly treated the BOC’s claim as a "permissive counterclaim"
which necessitates the payment of docket fees.

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As the preceding discussions would show, however, the BOC’s "claim" - i.e., its assertion of
ownership over the CB bills – is in reality just that, a "claim" against the stakeholder and not as a
"counterclaim," whether compulsory or permissive. It is only the BOC’s alternative prayer (for the
144  145 

PDB to deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successor-in-
interest of the buyer in the April 19 transaction, either the original subjects of the sales or the value
thereof plus whatever income that may have been earned pendente lite) and its prayer for damages
that are obviously compulsory counterclaims against the PDB and, therefore, does not require
payment of docket fees. 146

The PDB takes a contrary position through its insistence that a compulsory counterclaim should be
one where the presence of third parties, of whom the court cannot acquire jurisdiction, is not
required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills)
have already been dropped from the case, then the BOC’s counterclaim must only be permissive in
nature and the BOC should have paid the correct docket fees.

We see no reason to belabor this claim. Even if we gloss over the PDB’s own conformity to the
dropping of these entities as parties, the BOC correctly argues that a remedy is provided under the
Rules. Section 12, Rule 6 of the Rules of Court reads:

SEC. 12. Bringing new parties. – When the presence of parties other than those to the original action
is required for the granting of complete relief in the determination of a counterclaim or cross-claim,
the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.

Even then, the strict characterization of the BOC’s counterclaim is no longer material in disposing of
the PDB’s argument based on non-payment of docket fees.

When an action is filed in court, the complaint must be accompanied by the payment of the requisite
docket and filing fees by the party seeking affirmative relief from the court. It is the filing of the
complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the claim or the nature of the action. However, the
147 

non-payment of the docket fee at the time of filing does not automatically cause the dismissal of the
case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially
when the claimant demonstrates a willingness to abide by the rules prescribing such payment. 148

In the present case, considering the lack of a clear guideline on the payment of docket fee by the
claimants in an interpleader suit, compounded by the unusual manner in which the interpleader suit
was initiated and the circumstances surrounding it, we surely cannot deduce from the BOC’s mere
failure to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the
subjects of the sales in the April 15 and April 19 transactions, in its alternative prayer) an intention to
defraud the government that would warrant the dismissal of its claim. 149

At any rate, regardless of the nature of the BOC’s "counterclaims," for purposes of payment of filing
fees, both the BOC and the PDB, properly as defendants-in-interpleader, must be assessed the
payment of the correct docket fee arising from their respective claims. The seminal case of Sun
Insurance Office, Ltd. v. Judge Asuncion provides us guidance in the payment of docket fees, to
150 

wit:

1. x x x Where the filing of the initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.

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 2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period. [underscoring
ours]

This must be the rule considering that Section 7, Rule 62 of which reads:

SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. – The docket and other
lawful fees paid by the party who filed a complaint under this Rule, as well as the costs and litigation
expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court
shall order otherwise.

only pertain to the docket and lawful fees to be paid by the one who initiated the interpleader suit,
and who, under the Rules, actually "claims no interest whatever in the subject matter." By
constituting a lien on the subject matter of the action, Section 7 in effect only aims to actually
compensate the complainant-in-interpleader, who happens to be the stakeholder unfortunate
enough to get caught in a legal crossfire between two or more conflicting claimants, for the faultless
trouble it found itself into. Since the defendants-in-interpleader are actually the ones who make a
claim - only that it was extraordinarily done through the procedural device of interpleader - then to
them devolves the duty to pay the docket fees prescribed under Rule 141 of the Rules of Court, as
amended. 151

The importance of paying the correct amount of docket fee cannot be overemphasized:

The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray
court expenses in the handling of cases. Consequently, in order to avoid tremendous losses to the
judiciary, and to the government as well, the payment of docket fees cannot be made dependent on
the outcome of the case, except when the claimant is a pauper-litigant. 152

WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters
Development Bank is hereby REQUIRED to file with the Regional Trial Court its comment or
answer-in-interpleader to Bank of Commerce’s Amended Consolidated Answer with Compulsory
Counterclaim, as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati
City, Branch 143, is hereby ORDERED to assess the docket fees due from Planters Development
Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE
DISPATCH the parties’ conflicting claims of ownership over the proceeds of the Central Bank bills.

The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized
representative is hereby ORDERED to assess and collect the appropriate amount of docket fees
separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in
Bangko Sentral ng Pilipinas’ interpleader suit, in accordance with this decision.

SO ORDERED.

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 THIRD DIVISION

G.R. No. 211356, September 29, 2014

CRISOSTOMO B. AQUINO, Petitioner, v. MUNICIPALITY OF MALAY, AKLAN,

REPRESENTED BY HON. MAYOR JOHN P. YAP, SANGGUNIANG BAYAN OF
MALAY, AKLAN, REPRESENTED BY HON. EZEL FLORES, DANTE PASUGUIRON,
ROWEN AGUIRRE, WILBEC GELITO, JUPITER GALLENERO, OFFICE OF THE
MUNICIPAL ENGINEER, OFFICE OF THE MUNICIPAL TREASURER, BORACAY
PNP CHIEF, BORACAY FOUNDATION, INC., REPRESENTED BY NENETTE GRAF,
MUNICIPAL AUXILIARY POLICE, AND JOHN AND JANE DOES, Respondents.

DECISION

VELASCO JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari challenging the Decision1 and the
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 120042 dated August 13,
2013 and February 3, 2014, respectively. The assailed rulings denied Crisostomo
Aquino’s Petition for Certiorari for not being the proper remedy to question the issuance
and implementation of Executive Order No. 10, Series of 2011 (EO 10), ordering the
demolition of his hotel establishment.

The Facts

Petitioner is the president and chief executive officer of Boracay Island West Cove
Management Philippines, Inc. (Boracay West Cove). On January 7, 2010, the company
applied for a zoning compliance with the municipal government of Malay, Aklan.2 While
the company was already operating a resort in the area, the application sought the
issuance of a building permit covering the construction of a three-storey hotel over a
parcel of land measuring 998 sqm. located in Sitio Diniwid, Barangay Balagab, Boracay
Island, Malay, Aklan, which is covered by a Forest Land Use Agreement for Tourism
Purposes (FLAgT) issued by the Department of Environment and Natural Resources
(DENR) in favor of Boracay West Cove.

Through a Decision on Zoning dated January 20, 2010, the Municipal Zoning
Administrator denied petitioner’s application on the ground that the proposed
construction site was within the “no build zone” demarcated in Municipal Ordinance
2000-131 (Ordinance).3 As provided in the Ordinance: chanRoblesvirtualLawlibrary

SECTION 2. – Definition of Terms. As used in this Ordinance, the following words, terms
and phrases shall mean as follows: chanRoblesvirtualLawlibrary

xxxx

(b) No Build Zone – the space twenty-five (25) meters from the edge of the mean high
water mark measured inland;

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xxxx

SECTION 3. – No building or structure of any kind whether temporary or permanent

shall be allowed to be set up, erected or constructed on the beaches around the Island
of Boracay and in its offshore waters. During the conduct of special activities or special
events, the Sangguniang Bayan may, through a Resolution, authorize the Office of the
Mayor to issue Special Permits for construction of temporary structures on the beach
for the duration of the special activity as embodied in the Resolution.

In due time, petitioner appealed the denial action to the Office of the Mayor on
February 1, 2010.

On May 13, 2010, petitioner followed up his appeal through a letter but no action was
ever taken by the respondent mayor. On April 5, 2011, however, a Notice of
Assessment was sent to petitioner asking for the settlement of Boracay West Cove’s
unpaid taxes and other liabilities under pain of a recommendation for closure in view of
its continuous commercial operation since 2009 sans the necessary zoning clearance,
building permit, and business and mayor’s permit. In reply, petitioner expressed
willingness to settle the company’s obligations, but the municipal treasurer refused to
accept the tendered payment. Meanwhile, petitioner continued with the construction,
expansion, and operation of the resort hotel.

Subsequently, on March 28, 2011, a Cease and Desist Order was issued by the
municipal government, enjoining the expansion of the resort, and on June 7, 2011, the
Office of the Mayor of Malay, Aklan issued the assailed EO 10, ordering the closure and
demolition of Boracay West Cove’s hotel.

EO 10 was partially implemented on June 10, 2011. Thereafter, two more instances
followed wherein respondents demolished the improvements introduced by Boracay
West Cove, the most recent of which was made in February 2014.

Alleging that the order was issued and executed with grave abuse of discretion,
petitioner filed a Petition for Certiorari with prayer for injunctive relief with the CA. He
argued that judicial proceedings should first be conducted before the respondent mayor
could order the demolition of the company’s establishment; that Boracay West Cove
was granted a FLAgT by the DENR, which bestowed the company the right to construct
permanent improvements on the area in question; that since the area is a forestland, it
is the DENR—and not the municipality of Malay, or any other local government unit for
that matter—that has primary jurisdiction over the area, and that the Regional
Executive Director of DENR-Region 6 had officially issued an opinion regarding the legal
issues involved in the present case; that the Ordinance admits of exceptions; and
lastly, that it is the mayor who should be blamed for not issuing the necessary
clearances in the company’s favor.

In rebuttal, respondents contended that the FLAgT does not excuse the company from
complying with the Ordinance and Presidential Decree No. 1096 (PD 1096), otherwise
known as the National Building Code of the Philippines. Respondents also argued that
the demolition needed no court order because the municipal mayor has the express

297 | P a g e
power under the Local Government Code (LGC) to order the removal of illegally
constructed buildings.

Ruling of the Court of Appeals

In its assailed Decision dated August 13, 2013, the CA dismissed the petition solely on
procedural ground, i.e., the special writ of certiorari can only be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial functions and since the
issuance of EO 10 was done in the exercise of executive functions, and not of judicial or
quasi-judicial functions, certiorari will not lie. Instead, the proper remedy for the
petitioner, according to the CA, is to file a petition for declaratory relief with the
Regional Trial Court.

Petitioner sought reconsideration but this was denied by the CA on February 3, 2014
through the challenged Resolution. Hence, the instant petition raising arguments on
both procedure and substance.

The Issues

Stripped to the essentials, the pivotal issues in the extant case are as follows: chanRoblesvirtualLawlibrary

The propriety under the premises of the filing of a petition

for certiorari instead of a petition for declaratory relief;

a. Whether or not declaratory relief is still available to petitioner;

b. Whether or not the CA correctly ruled that the respondent mayor was performing
neither a judicial nor quasi-judicial function when he ordered the closure and
demolition of Boracay West Cove’s hotel;

Whether or not respondent mayor committed grave abuse of discretion when

he issued EO 10;

a. Whether or not petitioner’s right to due process was violated when the
respondent mayor ordered the closure  and demolition of Boracay West Cove’s
hotel without first conducting judicial proceedings;

b. Whether or not the LGU’s refusal to issue petitioner the necessary building
permit and clearances was justified;

c. Whether or not petitioner’s rights under the FLAgT prevail over the municipal
ordinance providing for a no-build zone; and ChanRoblesVirtualawlibrary

d. Whether or not the DENR has primary jurisdiction over the controversy, not the
LGU.

The Court’s Ruling

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We deny the petition.

Certiorari, not declaratory relief, is the proper remedy

a. Declaratory relief no longer viable

Resolving first the procedural aspect of the case, We find merit in petitioner’s
contention that the special writ of certiorari , and not declaratory relief, is the proper
remedy for assailing EO 10. As provided under Sec. 1, Rule 63 of the Rules of Court: chanRoblesvirtualLawlibrary

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract
or other written instrument, whose rights are affected by a statute, executive order or
regulation, ordinance or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine
any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder. x x x (emphasis added)

An action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of the rights arising thereunder.  Since the purpose of an action
for declaratory relief is to secure an authoritative statement of the rights and
obligations of the parties under a statute, deed, or contract for their guidance in the
enforcement thereof, or compliance therewith, and not to settle issues arising from an
alleged breach thereof, it may be entertained before the breach or violation of the
statute, deed or contract to which it refers.  A petition for declaratory relief gives a
practical remedy for ending controversies that have not reached the state where
another relief is immediately available; and supplies the need for a form of action that
will set controversies at rest before they lead to a repudiation of obligations, an
invasion of rights, and a commission of wrongs.4 cralawlawlibrary

In the case at bar, the petition for declaratory relief became unavailable by EO 10’s
enforcement and implementation. The closure and demolition of the hotel rendered
futile any possible guidelines that may be issued by the trial court for carrying out the
directives in the challenged EO 10. Indubitably, the CA erred when it ruled that
declaratory relief is the proper remedy given such a situation.

b. Petitioner correctly resorted to certiorari

On the propriety of filing a petition for certiorari , Sec. 1, Rule 65 of the Rules of Court
provides: chanRoblesvirtualLawlibrary

Section 1. Petition for certiorari . — When any tribunal, board or officer exercising

judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require. x x x

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For certiorari to prosper, the petitioner must establish the concurrence of the following
requisites, namely: chanRoblesvirtualLawlibrary

1. The writ is directed against a tribunal, board, or officer exercising judicial or

quasi-judicial functions;

2. Such tribunal, board, or officer has acted without or in excess of jurisdiction, or

with grave abuse of discretion amounting to lack or excess of jurisdiction; and ChanRoblesVirtualawlibrary

3. There is no appeal or any plain speedy, and adequate remedy in the ordinary
course of law.5

Guilty of reiteration, the CA immediately dismissed the Petition for Certiorari upon
determining that the first element is wanting—that respondent mayor was allegedly not
exercising judicial or quasi-judicial functions when he issued EO 10.

We are not persuaded.

The CA fell into a trap when it ruled that a mayor, an officer from the executive
department, exercises an executive function whenever he issues an Executive Order.
This is tad too presumptive for it is the nature of the act to be performed, rather than
of the office, board, or body which performs it, that determines whether or not a
particular act is a discharge of judicial or quasi-judicial functions. The first requirement
for certiorari is satisfied if the officers act judicially in making their decision, whatever
may be their public character.6 cralawlawlibrary

It is not essential that the challenged proceedings should be strictly and technically
judicial, in the sense in which that word is used when applied to courts of justice, but it
is sufficient if they are quasi-judicial.7   To contrast, a party is said to be exercising
a judicial function  where he has the power to determine what the law is and what legal
rights of the parties are, and then undertakes to determine these questions and
adjudicate upon the rights of the parties, whereas quasi-judicial function is “a term
which applies to the actions, discretion, etc., of public administrative officers or bodies
x x x required to investigate facts or ascertain the existence of facts, hold hearings, and
draw conclusions from them as a basis for their official action and to exercise discretion
of a judicial nature.”8 cralawlawlibrary

In the case at bench, the assailed EO 10 was issued upon the respondent mayor’s
finding that Boracay West Cove’s construction, expansion, and operation of its hotel in
Malay, Aklan is illegal. Such a finding of illegality required the respondent mayor’s
exercise of quasi-judicial functions, against which the special writ of certiorari may lie.
Apropos hereto is Our ruling in City Engineer of Baguio v. Baniqued:9 cralawlawlibrary

There is no gainsaying that a city mayor is an executive official nor is the matter of
issuing demolition notices or orders not a ministerial one. In determining whether or
not a structure is illegal or it should be demolished, property rights are involved thereby
needing notices and opportunity to be heard as provided for in the constitutionally

300 | P a g e
guaranteed right of due process.  In pursuit of these functions, the city mayor has to
exercise quasi-judicial powers.

With the foregoing discussion, the CA erred in ruling that the respondent mayor was
merely exercising his executive functions, for clearly, the first requisite for the special
writ has been satisfied.

Aside from the first requisite, We likewise hold that the third element, i.e., the
unavailability of a plain, speedy, or adequate remedy, is also present herein. While it
may be argued that, under the LGC, Executive Orders issued by mayors are subject to
review by provincial governors,10 this cannot be considered as an adequate remedy
given the exigencies of petitioner’s predicament.

In a litany of cases, We have held that it is inadequacy, not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must
usually determine the propriety of certiorari . A remedy is plain, speedy and adequate if
it will promptly relieve the petitioner from the injurious effects of the judgment, order,
or resolution of the lower court or agency. It is understood, then, that a litigant need
not mark time by resorting to the less speedy remedy of appeal in order to have an
order annulled and set aside for being patently void for failure of the trial court to
comply with the Rules of Court.11 cralawlawlibrary

Before applying this doctrine, it must first be borne in mind that respondents in this
case have already taken measures towards implementing EO 10. In fact, substantial
segments of the hotel have already been demolished pursuant to the mayor’s directive. 
It is then understandable why petitioner prayed for the issuance of an injunctive writ––
a provisional remedy that would otherwise have been unavailable had he sought a
reversal from the office of the provincial governor of Aklan. Evidently, petitioner
correctly saw the urgent need for judicial intervention via certiorari .

In light of the foregoing, the CA should have proceeded to grab the bull by its horns
and determine the existence of the second element of certiorari ––whether or not there
was grave abuse of discretion on the part of respondents.

Upon Our finding that a petition for certiorari under Rule 65 is the appropriate remedy,
We will proceed to resolve the core issues in view of the urgency of the reliefs prayed
for in the petition.

Respondents did not commit grave abuse of discretion

a. The hotel’s classification as a nuisance

Article 694 of the Civil Code defines “nuisance” as any act, omission, establishment,
business, condition or property, or anything else that (1) injures or endangers the
health or safety of others; (2) annoys or offends the senses; (3) shocks, defies or
disregards decency or morality; (4) obstructs or interferes with the free passage of any
public highway or street, or any body of water; or (5) hinders or impairs the use of
property.12 cralawlawlibrary

In establishing a no build zone through local legislation, the LGU effectively made a

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determination that constructions therein, without first securing exemptions from the
local council, qualify as nuisances for they pose a threat to public safety. No build zones
are intended for the protection of the public because the stability of the ground’s
foundation is adversely affected by the nearby body of water. The ever present threat
of high rising storm surges also justifies the ban on permanent constructions near the
shoreline. Indeed, the area’s exposure to potential geo-hazards cannot be ignored and
ample protection to the residents of Malay, Aklan should be afforded.

Challenging the validity of the public respondents’ actuations, petitioner posits that the
hotel cannot summarily be abated because it is not a nuisance per se, given the
hundred million peso-worth of capital infused in the venture. Citing Asilo, Jr. v.
People,13 petitioner also argues that respondents should have first secured a court order
before proceeding with the demolition.

Preliminarily, We agree with petitioner’s posture that the property involved cannot be
classified as a nuisance per se,  but not for the reason he so offers. Property valuation,
after all, is not the litmus test for such a determination. More controlling is the
property’s nature and conditions, which should be evaluated to see if it qualifies as a
nuisance as defined under the law.

As jurisprudence elucidates, nuisances are of two kinds: nuisance per se and

nuisance per accidens. The first is recognized as a nuisance under any and all
circumstances, because it constitutes a direct menace to public health or safety, and,
for that reason, may be abated summarily under the undefined law of necessity. The
second is that which depends upon certain conditions and circumstances, and its
existence being a question of fact, it cannot be abated without due hearing thereon in a
tribunal authorized to decide whether such a thing does in law constitute a nuisance.14 cralawlawlibrary

In the case at bar, the hotel, in itself, cannot be considered as a nuisance per se since
this type of nuisance is generally defined as an act, occupation, or structure, which
is a nuisance at all times and under any circumstances, regardless of location or
surrounding.15 Here, it is merely the hotel’s particular incident––its location––and not
its inherent qualities that rendered it a nuisance. Otherwise stated, had it not been
constructed in the no build zone, Boracay West Cove could have secured the necessary
permits without issue. As such, petitioner is correct that the hotel is not a nuisance per
se, but to Our mind, it is still a nuisance per accidens.

b.    Respondent mayor has the power to order the demolition of illegal
constructions 

Generally, LGUs have no power to declare a particular thing as a nuisance unless such a
thing is a nuisance  per se.16 So it was held in AC Enterprises v. Frabelle Properties
Corp:17 cralawlawlibrary

We agree with petitioner’s contention that, under Section 447(a)(3)(i) of R.A. No. 7160,
otherwise known as the Local Government Code, the Sangguniang Panglungsod is
empowered to enact ordinances declaring, preventing or abating noise and other forms
of nuisance. It bears stressing, however, that the Sangguniang Bayan cannot declare a
particular thing as a nuisance per se and order its condemnation. It does not have
the power to find, as a fact, that a particular thing is a nuisance when such

302 | P a g e
thing is not a nuisance per se; nor can it authorize the extrajudicial
condemnation and destruction of that as a nuisance which in its nature,
situation or use is not such. Those things must be determined and resolved in
the ordinary courts of law. If a thing, be in fact, a nuisance due to the manner of its
operation, that question cannot be determined by a mere resolution of the Sangguniang
Bayan. (emphasis supplied)

Despite the hotel’s classification as a nuisance per accidens, however, We still find in

this case that the LGU may nevertheless properly order the hotel’s demolition. This is
because, in the exercise of police power and the general welfare clause,18 property
rights of individuals may be subjected to restraints and burdens in order to fulfill the
objectives of the government. Otherwise stated, the government may enact legislation
that may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare.19 cralawlawlibrary

One such piece of legislation is the LGC, which authorizes city and municipal
governments, acting through their local chief executives, to issue demolition orders.
Under existing laws, the office of the mayor is given powers not only relative to its
function as the executive official of the town; it has also been endowed with authority
to hear issues involving property rights of individuals and to come out with an effective
order or resolution thereon.20 Pertinent herein is Sec. 444 (b)(3)(vi) of the LGC, which
empowered the mayor to order the closure and removal of illegally constructed
establishments for failing to secure the necessary permits, to wit: chanRoblesvirtualLawlibrary

Section 444. The Chief Executive: Powers, Duties, Functions and Compensation. –

xxxx

(b) For efficient, effective and economical governance the purpose of which is the
general welfare of the municipality and its inhabitants pursuant to Section 16 of this
Code, the municipal mayor shall: chanroblesvirtuallawlibrary

xxxx

(3) Initiate and maximize the generation of resources and revenues, and apply the
same to the implementation of development plans, program objectives and priorities as
provided for under Section 18 of this Code, particularly those resources and revenues
programmed for agro-industrial development and country-wide growth and progress,
and relative thereto, shall:
chanroblesvirtuallawlibrary

xxxx

(vi) Require owners of illegally constructed houses, buildings or other

structures to obtain the necessary permit, subject to such fines and penalties
as may be imposed by law or ordinance, or to make necessary changes in the
construction of the same when said construction violates any law or
ordinance, or to order the demolition or removal of said house, building or
structure within the period prescribed by law or ordinance. (emphasis supplied)

c.  Requirements for the exercise of the power are present

i.   Illegality of structures

303 | P a g e
In the case at bar, petitioner admittedly failed to secure the necessary permits,
clearances, and exemptions before the construction, expansion, and operation of
Boracay Wet Cove’s hotel in Malay, Aklan. To recall, petitioner declared that the
application for zoning compliance was still pending with the office of the mayor even
though construction and operation were already ongoing at the same time. As such, it
could no longer be denied that petitioner openly violated Municipal Ordinance 2000-
131, which provides: chanRoblesvirtualLawlibrary

SECTION 9. – Permits and Clearances.

(a) No building or structure shall be allowed to start construction unless a Building

Permit therefore has been duly issued by the Office of the Municipal Engineer. Once
issued, the building owner or any person in charge of the construction shall display on the
lot or on the building undergoing construction a placard containing the Building Permit
Number and the date of its issue. The office of the Municipal Engineer shall not issue
any building permit unless:
1. The proposed construction has been duly issued a Zoning Clearance by the
Office of the Municipal Zoning Officer;
2. The proposed construction has been duly endorsed by the Sangguniang Bayan
through a Letter of Endorsement.

(b) Only buildings/structures which has complied with all the requirements for its construction
as verified to by the Building Inspector and the Sangguniang Bayan shall be issued a
Certificate of Occupancy by the Office of the Municipal Engineer.
(c) No Business or Mayor’s Permit shall be issued to businesses being undertaken on
buildings or structures which were not issued a certificate of Occupancy beginning
January 2001 and thereafter.

xxxx

SECTION 10. – Penalties.

xxxx

(e) Any building, structure, or contraption erected in any public place within the
Municipality of Malay such as but not limited to streets, thoroughfares, sidewalks,
plazas, beaches or in any other public place are hereby declared as nuisance and illegal
structure. Such building structure or contraption shall be demolished by the
owner thereof or any of his authorized representative within ten (10) days
from receipt of the notice to demolish. Failure or refusal on the part of the
owner or any of his authorized representative to demolish the illegal structure
within the period herein above specified shall automatically authorize the
government of the Municipality of Malay to demolish the same, gather and
keep the construction materials of the demolished structure. (emphasis
supplied)

Petitioner cannot justify his position by passing the blame onto the respondent mayor
and the latter’s failure to act on his appeal for this does not, in any way, imply that

304 | P a g e
petitioner can proceed with his infrastructure projects. On the contrary, this only
means that the decision of the zoning administrator denying the application
still stands and that petitioner acquired no right to construct on the no build
zone. The illegality of the construction cannot be cured by merely tendering payment
for the necessary fees and permits since the LGU’s refusal rests on valid grounds.

Instead of taking the law into his own hands, petitioner could have filed, as an
alternative, a petition for mandamus to compel the respondent mayor to exercise
discretion and resolve the controversy pending before his office. There is indeed an
exception to the rule that matters involving judgment and discretion are beyond the
reach of a writ of mandamus, for such writ may be issued to compel action in those
matters, when refused. Whether or not the decision would be for or against petitioner
would be for the respondent mayor to decide, for while mandamus may be invoked to
compel the exercise of discretion, it cannot compel such discretion to be exercised in a
particular way.21 What would have been important was for the respondent mayor to
immediately resolve the case for petitioner to be able to go through the motions that
the zoning clearance application process entailed.

Alas, petitioner opted to defy the zoning administrator’s ruling. He consciously chose to
violate not only the Ordinance but also Sec. 301 of PD 1096, laying down the
requirement of building permits, which provides: chanRoblesvirtualLawlibrary

Section 301. Building Permits. No person, firm or corporation, including any agency or
instrumentality of the government shall erect, construct, alter, repair, move, convert or
demolish any building or structure or cause the same to be done without first obtaining
a building permit therefor from the Building Official assigned in the place where the
subject building is located or the building work is to be done.

This twin violation of law and ordinance warranted the LGU’s invocation of Sec. 444 (b)
(3)(vi) of the LGC, which power is separate and distinct from the power to summarily
abate nuisances per se. Under the law, insofar as illegal constructions are concerned,
the mayor can, after satisfying the requirement of due notice and hearing, order their
closure and demolition.
ii. Observance of procedural due process rights
In the case at bench, the due process requirement is deemed to have been sufficiently
complied with. First, basic is the rule that public officers enjoy the presumption of
regularity in the performance of their duties.22 The burden is on the petitioner herein to
prove that Boracay West Cove was deprived of the opportunity to be heard before EO
10 was issued. Regrettably, copies of the Cease and Desist Order issued by the LGU
and of the assailed EO 10 itself were never attached to the petition before this Court,
which documents could have readily shed light on whether or not petitioner has been
accorded the 10-day grace period provided in Section 10 of the Ordinance. In view of
this fact, the presumption of regularity must be sustained. Second, as quoted by
petitioner in his petition before the CA, the assailed EO 10 states that petitioner
received notices from the municipality government on March 7 and 28, 2011, requiring
Boracay West Cove to comply with the zoning ordinance and yet it failed to do so.23   If
such was the case, the grace period can be deemed observed and the establishment
was already ripe for closure and demolition by the time EO 10 was issued in
June. Third, the observance of the 10-day allowance for the owner to demolish the
hotel was never questioned by petitioner so there is no need to discuss the same.

305 | P a g e
Verily, the only grounds invoked by petitioner in crying due process violation are (1) the
absence of a court order prior to demolition and (2) the municipal government’s
exercise of jurisdiction over the controversy instead of the DENR. Therefore, it can no
longer be belatedly argued that the 10-day grace period was not observed because to
entertain the same would result in the violation of the respondents’ own due process
rights.

Given the presence of the requirements under Sec. 444 (b)(3)(vi) of the LGC, whether
the building constituted a nuisance per se or a nuisance per accidens becomes
immaterial. The hotel was demolished not exactly because it is a nuisance but because
it failed to comply with the legal requirements prior to construction. It just so happened
that, in the case at bar, the hotel’s incident that qualified it as a nuisance per
accidens––its being constructed within the no build zone––further resulted in the non-
issuance of the necessary permits and clearances, which is a ground for demolition
under the LGC. Under the premises, a court order that is required under normal
circumstances is hereby dispensed with.

d.    The FLAgT cannot prevail over the municipal ordinance and PD 1096

Petitioner next directs our attention to the following FLAgT provision: chanRoblesvirtualLawlibrary

VII. The SECOND PARTY may construct permanent and/or temporary improvements or
infrastructure in the FLAgT Area necessary and appropriate for its development for
tourism purposes pursuant to the approved SMP. “Permanent Improvements” refer to
access roads, and buildings or structures which adhere to the ground in a fixed and
permanent manner. On the other hand, “Temporary Improvements” include those
which are detachable from the foundation or the ground introduced by the SECOND
PARTY in the FLAgT Area and which the SECOND PARTY may remove or dismantle upon
expiration or cancellation of this AGREEMENT x x x.24 chanrobleslaw

Taken in conjunction with the exceptions laid down in Sections 6 and 8 of the
Ordinance, petitioner argues that Boracay West Cove is exempted from securing
permits from the LGU. Said exceptions read: chanRoblesvirtualLawlibrary

SECTION 6. – No building or structure shall be allowed to be constructed on a slope

Twenty Five Percent (25%) or higher unless provided with soil erosion protective
structures and authorized by the Department of Environment and Natural Resources.

xxxx

SECTION 8. – No building or structure shall be allowed to be constructed on a swamp or

other water-clogged areas unless authorized by the Department of Environment and
Natural Resources.

According to petitioner, the fact that it was issued a FLAgT constitutes sufficient
authorization from the DENR to proceed with the construction of the three-storey hotel.

The argument does not persuade.

The rights granted to petitioner under the FLAgT are not unbridled. Forestlands,

306 | P a g e
although under the management of the DENR, are not exempt from the territorial
application of municipal laws, for local government units legitimately exercise their
powers of government over their defined territorial jurisdiction.

Furthermore, the conditions set forth in the FLAgT and the limitations circumscribed in
the ordinance are not mutually exclusive and are, in fact, cumulative. As sourced from
Sec. 447 (a)(5)(i) of the LGC: chanRoblesvirtualLawlibrary

Section 447. Powers, Duties, Functions and Compensation. –

(a) The sangguniang bayan, as the legislative body of the municipality, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the
municipality and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the municipality as provided for under Section 22 of
this Code, and shall: chanroblesvirtuallawlibrary

xxxx

(5) Approve ordinances which shall ensure the efficient and effective delivery of the
basic services and facilities as provided for under Section 17 of this Code, and in
addition to said services and facilities, shall: chanroblesvirtuallawlibrary

(i) Provide for the establishment, maintenance, protection, and conservation

of communal forests and watersheds, tree parks, greenbelts, mangroves, and other
similar forest development projects x x x. (emphasis added)

Thus, aside from complying with the provisions in the FLAgT granted by the DENR, it
was incumbent on petitioner to likewise comply with the no build zone restriction under
Municipal Ordinance 2000-131, which was already in force even before the FLAgT was
entered into. On this point, it is well to stress that Sections 6 and 8 of the Ordinance do
not exempt petitioner from complying with the restrictions since these provisions
adverted to grant exemptions from the ban on constructions on slopes and swamps, not
on the no build zone.

Additionally, the FLAgT does not excuse petitioner from complying with PD 1096. As
correctly pointed out by respondents, the agreement cannot and will not amend or
change the law because a legislative act cannot be altered by mere contractual
agreement. Hence, petitioner has no valid reason for its failure to secure a building
permit pursuant to Sec. 301 of the National Building Code.

e.  The DENR does not have primary jurisdiction over the controversy

Lastly, in ascribing grave abuse of discretion on the part of the respondent mayor,
petitioner argued that the hotel site is a forestland under the primary jurisdiction of the
DENR. As such, the merits of the case should have been passed upon by the agency
and not by the LGU. In the alternative, petitioner explains that even if jurisdiction over
the matter has been devolved in favor of the LGU, the DENR still has the power of
review and supervision over the former’s rulings. As cited by the petitioner, the LGC
reads: chanRoblesvirtualLawlibrary

Section 17. Basic Services and Facilities. –

307 | P a g e
xxxx

(b) Such basic services and facilities include, but are not limited to, the following: chanroblesvirtuallawlibrary

xxxx

(2) For a Municipality: chanroblesvirtuallawlibrary

xxxx

(ii) Pursuant to national policies and subject to supervision, control and review of the
DENR, implementation of community-based forestry projects which include integrated
social forestry programs and similar projects; management and control of communal
forests with an area not exceeding fifty (50) square kilometers; establishment of tree
parks, greenbelts, and similar forest development projects. (emphasis added)

Petitioner has made much of the fact that in line with this provision, the DENR Region 6
had issued an opinion favourable to petitioner.25 To petitioner, the adverted opinion
effectively reversed the findings of the respondent mayor that the structure introduced
was illegally constructed.

We disagree.

In alleging that the case concerns the development and the proper use of the country’s
environment and natural resources, petitioner is skirting the principal issue, which is
Boracay West Cove’s non-compliance with the permit, clearance, and zoning
requirements for building constructions under national and municipal laws. He
downplays Boracay West Cove’s omission in a bid to justify ousting the LGU of
jurisdiction over the case and transferring the same to the DENR. He attempts to blow
the issue out of proportion when it all boils down to whether or not the construction of
the three-storey hotel was supported by the necessary documentary requirements.

Based on law and jurisprudence, the office of the mayor has quasi-judicial powers to
order the closing and demolition of establishments. This power granted by the LGC, as
earlier explained, We believe, is not the same power devolved in favor of the LGU under
Sec. 17 (b)(2)(ii), as above-quoted, which is subject to review by the DENR. The fact
that the building to be demolished is located within a forestland under the
administration of the DENR is of no moment, for what is involved herein, strictly
speaking, is not an issue on environmental protection, conservation of natural
resources, and the maintenance of ecological balance, but the legality or illegality of the
structure. Rather than treating this as an environmental issue then, focus should not be
diverted from the root cause of this debacle––compliance.

Ultimately, the purported power of review by a regional office of the DENR over
respondents’ actions exercised through an instrumentality of an ex-parte opinion, in
this case, finds no sufficient basis. At best, the legal opinion rendered, though perhaps
informative, is not conclusive on the courts and should be taken with a grain of salt.

WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of

merit. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No.
120042 dated August 13, 2013 and February 3, 2014, respectively, are
hereby AFFIRMED.

308 | P a g e
SO ORDERED. cralawred

309 | P a g e
 SECOND DIVISION
[ G.R. No. 205128, August 09, 2017 ]
HEIRS OF ELIZA Q. ZOLETA, NAMELY: SERGIO RENATO Q. ZOLETA, A.K.A., CARLOS
ZOLETA, VENANCIO Q. ZOLETA, AND MILAGROS Q. ZOLETA-GARCIA, PETITIONERS, VS.
LAND BANK OF THE PHILIPPINES AND DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD, RESPONDENTS.

DECISION
LEONEN, J.:
A perceived abuse cannot be cured by an abuse. Administrative agencies, such as the Department of Agrarian
Reform Adjudication Board (DARAB), are not courts of law exercising judicial power. The power to issue writs of
certiorari is an incident of judicial review. Thus, administrative agencies may not issue writs of certiorari to annul acts
of officers or state organs even when they exercise supervisory authority over these officers or organs.

This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure praying that the
assailed July 23, 2012 Decision[2] and January 9, 2013 Resolution[3] of the Court of Appeals be reversed and set
aside. It is prayed that in lieu of them, judgment be rendered directing respondent DARAB to dismiss the Petition for
Certiorari filed before it by respondent Land Bank of the Philippines (Landbank).

The assailed July 23, 2012 Decision denied the Petition for Certiorari and Prohibition filed by Sergio Renato Q.
Zoleta, Venancio Q. Zoleta, and Milagros Q. Zoleta-Garcia (petitioners). This Decision found no grave abuse of
discretion on the part of DARAB in issuing a resolution granting Landbank's Petition for Certiorari against an order
and alias writ of execution issued by Regional Agrarian Reform Adjudicator (RARAD) Conchita C. Miñas (Regional
Adjudicator Miñas).[4] The assailed January 9, 2013 Resolution denied petitioners' Motion for Reconsideration.[5]

On September 29, 1996, Eliza Zoleta (Eliza), through Venancio Q. Zoleta, voluntarily offered for sale to the
government, under the Comprehensive Agrarian Reform Program, a parcel of land covered by Transfer Certificate of
Title No. T-87673. This lot was located in Barangay Casay, San Francisco, Quezon and had an area of approximately
136 hectares.[6]

Pursuant to Executive Order No. 405,[7] Landbank made a valuation of the land and determined that only 125.4704
hectares of the property's 136 hectares were covered by the Comprehensive Agrarian Reform Program.[8] It valued
the covered portion at P3,986,639.57.[9] Landbank then deposited this amount in the name of Eliza.[10]

Eliza rejected Landbank's valuation. Thus, the matter was endorsed to the Office of the Provincial Agrarian Reform
Adjudicator (PARAD) of Quezon II.[11] However, upon Eliza's manifestation that the amount involved was beyond the
jurisdiction of PARAD, the case was transferred to the Office of RARAD.[12] The Office of RARAD then conducted
summary administrative proceedings pursuant to Section 16(d)[13] of Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988.[14]

On October 3, 2000, Regional Adjudicator Miñas rendered a Decision[15] fixing just compensation at P8,938,757.72.[16]

Not satisfied with the amount, Landbank filed a Petition for Just Compensation before the Regional Trial Court,
Branch 56, Lucena City, acting as Special Agrarian Court, on November 7, 2000.[17]

On November 9, 2000, Eliza filed a Motion for Execution of Judgment before the Office of Regional Adjudicator
Miñas. This was unsuccessfully opposed by Landbank.[18]

On January 16, 2001, Regional Adjudicator Miñas granted Eliza's motion for execution and issued an order directing
the issuance of a writ of execution. The writ of execution, however, was returned unsatisfied. Thus, Regional
Adjudicator Miñas issued an alias writ of execution on February 15, 2001. The following day, the DARAB Sheriff
issued a Notice of Garnishment and a Notice of Levy on Personal Property.[19]

Landbank sought from the Special Agrarian Court the quashal of the alias writ of execution and, in the interim, the

310 | P a g e
issuance of a temporary restraining order against its implementation. In the Resolution dated March 27, 2001, the
Special Agrarian Court denied Landbank's plea as DARAB had never been impleaded by Landbank as respondent,
thereby failing to vest the Special Agrarian Court with jurisdiction over DARAB.[20]

Unable to obtain relief from the Special Agrarian Court, Landbank, on April 2, 2001, filed before DARAB a "petition for
certiorari pursuant to  paragraph 2, Section 3, Rule VIII of the [1994] DARAB New Rules of Procedure."[21] It ascribed
"grave abuse of discretion amounting to lack or in excess of jurisdiction"[22] on the part of Regional Adjudicator Miñas
in issuing the January 16, 2001 Order and the February 15, 2001 Alias Writ of Execution.[23]

In the Resolution[24] dated May 12, 2006, DARAB granted Land Bank's petition for certiorari and "annulled" the
January 16, 2001 Order and the February 15, 2001 Alias Writ of Execution:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Order dated 16 January 2001 and an
Alias Writ of Execution dated 15 February 2001 pursuant to the Decision in DARAB Case No. V-0412-0339-98 dated
03 October 2000 is hereby ANNULLED and herein public respondent is hereby ordered to withdraw the same.

SO ORDERED.[25]

DARAB faulted Regional Adjudicator Miñas for relying on Rule XIV, Section 1 of the 1994 DARAB New Rules of
Procedure (1994 Rules),[26] which allows for 15 days for petitions for certiorari from DARAB rulings involving agrarian
disputes to be brought to the Court of Appeals, in concluding that her October 3, 2000 Decision had attained finality.
It noted that she should have instead relied on Rule XIII, Section 11[27] regarding the specific course of relief from
adjudicators' decisions on just compensation or valuation cases.[28]

Petitioners[29] then filed a Petition for Certiorari and Prohibition under Rule 65 of the 1997 Rules of Civil Procedure
before the Court of Appeals alleging that DARAB exceeded its authority when it granted Landbank's Petition for
Certiorari under Rule VIII, Section 3 of the 1994 Rules.[30]

In its assailed July 23, 2012 Decision,[31] the Court of Appeals held that DARAB's actions were sustained by its
general "supervisory authority" and appellate jurisdiction over rulings of RARADs and PARADs.[32]

In its assailed January 9, 2013 Resolution, the Court of Appeals denied petitioners' Motion for Reconsideration.[33]

Hence, the present Petition was filed.

For resolution is the issue of whether it was proper for respondent DARAB to issue its May 12, 2006 Resolution,
which granted respondent Landbank's "petition for certiorari pursuant to paragraph 2, Section 3, Rule VIII of the
[1994] DARAB New Rules of Procedure."[34]

It was not.

Jurisprudence has settled that DARAB possesses no power to issue writs of certiorari.

This Court's 2005 Decision in Department of Agrarian Reform Adjudication Board v. Lubrica[35] concerned a
controversy over the amount of just compensation due to a landowner, which was initially brought before RARAD.
RARAD decided in favor of the landowner and ordered Landbank to pay an amount that was greater than its initial
valuation.[36] Landbank then filed a petition for just compensation before the Regional Trial Court, acting as a Special
Agrarian Court,[37] This petition was dismissed as Landbank failed to timely pay docket fees.[38] RARAD then
considered its ruling on the amount of just compensation final and executory, and issued a writ of execution.
[39]
 Landbank filed a Petition for Certiorari  before DARAB, under Rule VIII, Section 3 of its 1994 Rules.[40] DARAB
ruled for Landbank and prevented the Regional Adjudicator from implementing her ruling.[41] This prompted the
landowner to file a Petition for Prohibition before the Court of Appeals, asking that DARAB be enjoined from
proceeding with the case, as it did not have jurisdiction over special civil actions for certiorari.[42] The Court of Appeals
ruled that DARAB had no jurisdiction over petitions for certiorari.[43]

311 | P a g e
This Court sustained the ruling of the Court of Appeals. In doing so, this Court emphasized that jurisdiction over the
subject matter must be provided by law. It noted that there was no law that vested DARAB with jurisdiction over
petitions for certiorari.  Rather than finding constitutional or statutory basis, DARAB's supposed certiorari power was
provided only by its own rules of procedure:

Jurisdiction, or the legal power to hear and determine a cause or causes of action, must exist as a matter of law. It is
settled that the authority to issue writs of certiorari, prohibition, and mandamus involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law. It is never derived by implication. Indeed,
while the power to issue the writ of certiorari is in some instance conferred on all courts by constitutional or statutory
provisions, ordinarily, the particular courts which have such power are expressly designated.

....

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in
the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such
powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency. The grant
of original jurisdiction on a quasi-judicial agency is not implied. There is no question that the legislative grant of
adjudicatory powers upon the DAR, as in all other quasi-judicial agencies, bodies and tribunals, is in the nature of a
limited and special jurisdiction, that is, the authority to hear and determine a class of cases within the DAR's
competence and field of expertise. In conferring adjudicatory powers and functions on the DAR, the legislature could
not have intended to create a regular court of justice out of the DARAB, equipped with all the vast powers inherent in
the exercise of its jurisdiction. The DARAB is only a quasi-judicial body, whose limited jurisdiction does not include
authority over petitions for certiorari, in the absence of an express grant in R.A. No. 6657, E.O. No. 229 and E.O. No.
129-A.[44] (Citations omitted)

This Court calibrates the pronouncements made in Department of Agrarian Reform Adjudication Board v. Lubrica.  It
is true that the lack of an express constitutional or statutory grant of jurisdiction disables DARAB  from
exercising certiorari  powers. Apart from this, however, is a more fundamental reason for DARAB's disability.

As an administrative agency exercising quasi-judicial but not consummate judicial power, DARAB is inherently
incapable of issuing writs of certiorari. This is not merely a matter of statutorily stipulated competence but a question
that hearkens to the separation of government's tripartite powers: executive, legislative, and judicial.[45]

II

Conceived in England, transplanted into our jurisdiction during American occupation, and presently existing under the
1987 Constitution, the remedy of the writ of certiorari was and remains a means for superior judicial bodies to undo
the excesses of inferior tribunals.

The writ of certiorari  was a prerogative writ "issued by the King by virtue of his position as fountain of justice and
supreme head of the whole judicial administration."[46]

The King of England was considered the "supreme head of the nation with power over life, limb, and
property."[47] However, this status did not initially give him the absolute power to pronounce judgment.[48] By the
tradition carried over in the transition of Anglo-Saxon chieftains "from the ducal to the royal dignity,"[49] the power to
pronounce judgment was reserved to the members of the community themselves, "in accordance with the Teutonic
institution of popular courts."[50] The power that the King held was the appointment of persons, called sheriffs, "who[,]
as royal representatives[,] called the popular courts together; to see that justice was rendered in case of its denial;
personally to judge those powerful litigants who could not be controlled by the popular courts; and to execute or have
executed the sentences of the courts."[51]

Despite these limitations on his right to pronounce judgment, the King reserved the power to decide on certain cases:
first, those which affected the crown, such as criminal cases for violation of the King's peace; and second, cases
involving the revenue. The King and his advisers, known as the Curia Regis or the King's Council, decided these
cases. Its members were later on referred to as "justices" with a select member being referred to as the "justitiar" or

312 | P a g e
chief justice.[52]

Over time, the ways of popular courts—grounded as they were in custom, rather than on standardized mechanisms—
and evidence of sheriffs' partiality required the intervention of the King's Council, in order that cases may be "decided
by such new methods as the wisdom of the King and his counsellors might invent."[53] Thus, the King's council began
to issue writs, to serve as "expedients by which the jus honorarium of the King as fountain of justice was enabled to
remedy the defects of the jus civile or commune as applied in the local popular courts."[54]

In 1178, King Henry II realized that "there were too many justices in the Curia Regis to do the work
effectively."[55] Hence, he selected five (5) of his immediate personnel "before whom he ordered the complaints of the
people to be brought."[56] This group of five (5) people became known as the King's Bench. This was called as such
because its members were to sit "in banco. "[57] In addition to these five (5) members, "the King was supposed always
to sit in the King's Bench,"[58] With the King sitting in it, the King's Bench "was regarded as the highest court in the
land."[59] Even then, the King "reserved the most difficult cases for his own hearing."[60]

With the subsequent adoption of the Magna Carta, it was settled that "free persons and free property were to be
judged according to the law of the land."[61] To effect this precept, royal courts were established, such as the Court of
Common Pleas, where civil suits were litigated.[62]

With the King still "reserv[ing] to himself the decision of the most difficult cases,"[63] his complete formal judicial
supremacy emerged. "From his office proceeded all the writs which were formulated by the King and his advisers,
and by which actions were commenced."[64] Over time, and owing to sheer multiplicity, many writs ceased to be "writs
of grace, granted by the King in his good pleasure"[65] but came to be issued to litigants "de cursu"'or as a matter of
course.[66]

While most writs were issued de cursu  and upon proper demand, there remained writs reserved only for the King's
Bench: certiorari, mandamus, prohibition, and quo warranto. Consistent with the status of the King's Bench as "the
highest court in the land,"[67] it "controlled the action of the other courts" through these writs.[68] Nevertheless, the
King's Bench issued these writs "only in extraordinary cases . . . and only when some gross injustice was being done
by other authorities."[69] They were used only sparingly and in the most urgent of circumstances: "It remained the
function of the King, through his court of King's Bench, to [be the] judge of the necessity for their issue, and they
accordingly came to be known as prerogative writs."[70]

Spouses Delos Santos v. Metropolitan Bank and Trust Company[71] recounted the purposes of and circumstances
under which writs of certiorari were issued by the King's Bench:

In the common law, from which the remedy of certiorari  evolved, the writ of certiorari was issued out of Chancery, or
the King's Bench, commanding agents or officers of the inferior courts to return the record of a cause pending before
them, so as to give the party more sure and speedy justice, for the writ would enable the superior court to determine
from an inspection of the record whether the inferior court's judgment was rendered without authority. The errors
were of such a nature that, if allowed to stand, they would result in a substantial injury to the petitioner to whom no
other remedy was available. If the inferior court acted without authority, the record was then revised and corrected in
matters of law. The writ of certiorari  was limited to cases in which the inferior court was said to be exceeding its
jurisdiction or was not proceeding according to essential requirements of law and would lie only to review judicial or
quasi-judicial acts.[72] (Citations omitted)

The United States of America carried this English tradition. There, historically, only the courts which "have inherited
the jurisdiction of the English court of King's Bench" could issue a writ of certiorari.[73]

The writ of certiorari,  as a means of judicially rectifying a jurisdictional error, was adopted by the Philippines from the
California Code of Civil Procedure.[74] Our 1901 Code of Civil Procedure provided:

Section 220. Final Proceedings in Certiorari. — When the proceedings complained of have been fully certified, the
court shall hear the parties and determine whether the inferior tribunal, Board, or officer has regularly pursued its
authority; and if it finds that such inferior tribunal, Board, or officer has not regularly pursued its authority, it shall
thereupon give final judgment, either affirming, or annulling, or modifying the proceedings below, as the law requires.

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As Spouses Delos Santos v. Metropolitan Bank and Trust Company[75] further explained:

The concept of the remedy of certiorari in our judicial system remains much the same as it has been in the common
law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari  is largely regulated by laying
down the instances or situations in the Rules of Court in which a superior court may issue the writ of certiorari to an
inferior court or officer.[76]

Article VIII, Section 1 of the 1987 Constitution exclusively vests judicial power in this Court "and in such lower courts
as may be established by law." It identifies two (2) dimensions of judicial power. First is "the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and enforceable." Second is these
courts'  same duty "to determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government."[77]

To effect the second dimension and pursuant to this Court's power to "[promulgate rules concerning . . . pleading,
practice, and procedure in all courts,"[78] Rule 65 of the 1997 Rules of Civil Procedure defines the parameters for
availing the writ of certiorari:

SECTION 1.  Petition for certiorari.  — When any tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies
of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as
provided in the third paragraph of Section 3, Rule 46.

The requisites for the issuance of a writ of certiorari  are settled:

(a) the petition must be directed against a tribunal, Board, or officer exercising judicial or quasi-judicial
functions;

(b) the tribunal, Board, or officer must have acted without or in excess of jurisdiction or with grave
abuse of discretion amounting to lack or excess of jurisdiction; and

(c) there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.
[79]
 (Citation omitted)

The second and third requisites remain consistent with the original, Common Law conception of certiorari as availing
when "the inferior court's judgment was rendered without authority," such that it "exceed[ed] its jurisdiction," and only
when "no other remedy [is] available."[80]

A lower court or tribunal is deemed to have acted "without jurisdiction" when it decides a case even if no law gives it
the jurisdiction over its subject matter.[81] The decision of a lower court or tribunal can also be overturned
by certiorari when it acts "in excess of jurisdiction" or when it was given jurisdiction over the subject matter under the
law but it "has transcended the same or acted without any statutory authority."[82]

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"Grave abuse of discretion" has been defined as:

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.

Grave abuse of discretion refers not merely to palpable errors of jurisdiction; or to violations of the Constitution, the
law and jurisprudence. It refers also to cases in which, for various reasons, there has been a gross misapprehension
of facts.[83] (Citations omitted)

A petition for review on certiorari under Rule 45 should not be confused with a petition for certiorari  under Rule 65.
The first is a mode of appeal; the latter is an extraordinary remedy used to correct errors of jurisdiction. It is through
the latter that a writ of certiorari  is issued. Precisely, for the writ to issue, there must be "no appeal, or any plain,
speedy and adequate remedy" available.[84]

III

The second dimension of judicial power under Article VIII, Section 1 of the 1987 Constitution settles
the certiorari power as an incident of judicial review. Thus, judicial power includes the power of the courts to declare
the acts of the executive and legislative branches of the government void, when they act beyond the powers
conferred to them by law.[85] This second dimension does not operate independently of, but within the parameters
delimited by, the first dimension.

The first dimension of judicial power under Article VIII, Section 1 of the 1987 Constitution delimits the subject of
judicial inquiry, that is, to "actual controversies involving rights which are legally demandable and enforceable." The
exercise of this power, then, is proper only when a judicial question is raised, as opposed to a matter that is better left
to the competence of the other branches of the government.

Gonzales v. Climax Mining Ltd.[86] explained the concept of a judicial question, provided an illustration of a
controversy that involved a judicial question, and distinguished that example from another controversy that did not
involve a judicial question:

A judicial question is a question that is proper for determination by the courts, as opposed to a moot question or one
properly decided by the executive or legislative branch. A judicial question is raised when the determination of the
question involves the exercise of a judicial function; that is, the question involves the determination of what the law is
and what the legal rights of the parties are with respect to the matter in controversy.

....

[W]hether the case involves void or voidable contracts is still a judicial question. It may, in some instances, involve
questions of fact especially with regard to the determination of the circumstances of the execution of the contracts.
But the resolution of the validity or voidness of the contracts remains a legal or judicial question as it requires the
exercise of judicial function. It requires the ascertainment of what laws are applicable to the dispute, the interpretation
and application of those laws, and the rendering of a judgment based thereon. Clearly, the dispute is not a mining
conflict. It is essentially judicial. The complaint was not merely for the determination of rights under the mining
contracts since the very validity of those contracts is put in issue.[87] (Emphasis supplied, citations omitted)

The non-judicial "mining conflict" which Gonzales referenced was explained to be a factual or technical dispute that
was more properly considered an "administrative matter," rather than a judicial question:

On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs,
or permits, and (c) surface owners, occupants and claimholders/concessionaires. Under Republic Act No. 7942

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(otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original jurisdiction
to hear and decide these mining disputes. The Court of Appeals, in its questioned decision, correctly stated that the
Panel's jurisdiction is limited only to those mining disputes which raise questions of fact or matters requiring the
application of technological knowledge and experience.

In Pearson v. Intermediate Appellate Court, this Court observed that the trend has been to make the adjudication of
mining cases a purely administrative matter. Decisions of the Supreme Court on mining disputes have recognized a
distinction between (1) the primary powers granted by pertinent provisions of law to the then Secretary of Agriculture
and Natural Resources (and the bureau directors) of an executive or administrative nature, such as granting of
license, permits, lease and contracts, or approving, rejecting, reinstating or canceling applications, or deciding
conflicting applications, and (2) controversies or disagreements of civil or contractual nature between litigants which
are questions of a judicial nature that may be adjudicated only by the courts of justice.[88] (Citations omitted)

Administrative agencies are created to aid the government in the regulation of the country's "ramified
activities."[89] The creation of these agencies has become necessary because of "the growing complexity of the
modern society."[90] These agencies are considered specialists, which "can deal with the problems [in their respective
fields] with more expertise and dispatch than can be expected from the legislature or the courts of justice."[91]

Administrative agencies are part of the executive branch of the government.[92] However, due to their highly
specialized nature, they are not only vested executive powers but also with quasi-legislative and quasi-judicial
powers.[93]

Quasi-judicial power is "the power to hear and determine questions of fact to which the legislative policy is to apply
and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same
law."[94] It is limited to the adjudication of the rights of the parties that are incidental to the agency's functions under
the law. Its exercise does not amount to the executive's overreach into or appropriation of actual judicial competence:

Quasi-judicial or administrative adjudicatory power is the power of the administrative agency to adjudicate the rights
of persons before it. The administrative body exercises its quasi-judicial power when it performs in a judicial
manner  an act which is essentially executive or administrative in nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it.
[95]
 (Emphasis supplied)

Quasi-judicial power is vested in administrative agencies because complex issues call for "technical knowledge and
speed in countless controversies which cannot possibly be handled by regular courts."[96] Congress may, by law,
grant administrative agencies the exclusive original jurisdiction over cases within their competence.[97] Consistent with
their specialized but narrowly limited competencies, the scope of the quasi-judicial power vested in administrative
agencies is delineated in an agency's enabling statute:

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in
the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such
powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency.[98]

The basic nature of the certiorari power as an incident of judicial review—an exercise which must be limited to judicial
questions that are beyond the competence of administrative agencies—necessarily means that administrative
agencies have no certiorari powers.

The three (3) branches of our government—the Executive, Legislative, and Judicial branches—are superior in their
respective spheres. Subject to our system of checks and balances, one (1) branch cannot encroach on the duties and
prerogatives of another. The Legislative branch is tasked with enacting laws;[99] the Executive is responsible for the
implementation of laws; and the Judiciary interprets the Constitution and laws.[100]

Determining whether an act of an officer or state organ exercising judicial or quasi-judicial powers was made without
or in excess of jurisdiction demands an examination of the law delimiting that officer's or organ's jurisdiction. It is an

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exercise in legal interpretation. It is an exercise that only courts, and not administrative agencies, are competent to
engage in.

IV

Presidential Proclamation No. 131 instituted then President Corazon C. Aquino's Comprehensive Agrarian Reform
Program. Executive Order Nos. 229 and 129-A[101] put in place mechanisms for implementing this Program.

Executive Order No. 229 vested the Department of Agrarian Reform with quasi-judicial powers to resolve agrarian
reform cases and incidental powers to punish for contempt and to issue subpoenas and enforcement writs. It also
specified an appeal mechanism for decisions rendered by this Department:

Section 17. Quasi-Judicial Powers of the DAR.— The DAR is hereby vested with quasi-judicial powers to determine
and adjudicate agrarian reform matters, and shall have exclusive original jurisdiction over all matters involving
implementation of agrarian reform, except those falling under the exclusive original jurisdiction of the DENR and the
Department of Agriculture (DA).

The DAR shall have powers to punish for contempt arid to issue subpoena, subpoena duces tecum and writs to
enforce its orders or decisions.

The decisions of the DAR may, in proper cases, be appealed to the Regional Trial Courts but shall be immediately
executory notwithstanding such appeal.

Executive Order No. 129-A created DARAB, which was tasked to "assume the powers and functions with respect to
the adjudication of agrarian reform cases."[102] Section 13 specifies that the Board's powers may be delegated to the
regional offices of the Department, subject to its rules and regulations:

Section 13. Agrarian Reform Adjudication Board. — There is hereby created an Agrarian Reform Adjudication Board
under the Office of the Secretary. The Board shall be composed of the Secretary as Chairman, two (2)
Undersecretaries as may be designated by the Secretary, the Assistant Secretary for Legal Affairs, and three (3)
others to be appointed by the President upon the recommendation of the Secretary as members. A Secretariat shall
be constituted to support the Board. The Board shall assume the powers and functions with respect to the
adjudication of agrarian reform cases under Executive Order No. 229 and this Executive Order. These powers and
functions may be delegated to the regional offices of the Department in accordance with rules and regulations to be
promulgated by the Board.

Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 maintained the quasi-judicial jurisdiction
of the Department of Agrarian Reform:

Section 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with primary jurisdiction to determine
and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the
implementation of agrarian reform except those falling under the exclusive jurisdiction of the Department of
Agriculture (DA) and the Department of Environment and Natural Resources (DENR).

It shall not be bound by technical rules of procedure and evidence but shall proceed to hear and decide all cases,
disputes or controversies in a most expeditious manner, employing all reasonable means to ascertain the facts of
every case in accordance with justice and equity and the merits of the case. Toward this end, it shall adopt a uniform
rule of procedure to achieve a just, expeditious and inexpensive determination of every action or proceeding before it.

It shall have the power to summon witnesses, administer oaths, take testimony, require submission of reports,
compel the production of books and documents and answers to interrogatories and issue subpoena, and subpoena
duces tecum, and enforce its writs through sheriffs or other duly deputized officers. It shall likewise have the power to
punish direct and indirect contempts [sic] in the same manner and subject to the same penalties as provided in the
Rules of Court.

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Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers, or their organizations in
any proceedings before the DAR: Provided, however, That when there are two or more representatives for any
individual or group, the representatives should choose only one among themselves to represent such party or group
before any DAR proceedings.

Notwithstanding an appeal to the Court of Appeals, the decision of the DAR shall be immediately executory.

Pursuant to its power to "adopt a uniform, rule of procedure" under Republic Act No. 6657, the Department of
Agrarian Reform, through DARAB, adopted the Revised Rules of Procedure in 1989 (the 1989 Rules). The 1989
Rules were in lieu of "the previous Rules of Procedure adopted on January 29, 1988, pursuant to Executive Order
No. 129-A."[103]

The 1989 Rules delegated DARAB's adjudicatory powers to RARADs and PARADs[104] subject to its "functional
supervision."[105]

The 1989 Rules further provided that the decisions of PARADs and RARADs may be reviewed by the Board upon a
verified petition for review on certiorari. Rule VIII, Section 3 of these Rules stated:

Section 3. Totality of Case Assigned. — When a case is assigned to a RARAD or PARAD, any or all incidents thereto
shall be considered assigned to him, and the same shall be disposed of in the same proceedings to avoid multiplicity
of suits or proceedings.

The order or resolution of the Adjudicators on any issue, question, matter or incident raised before them shall be valid
and effective until the hearing shall have been terminated and the case is decided on the merits, unless modified and
reversed by the Board upon a verified petition for review on certiorari. Such interlocutory orders shall not be the
subject of an appeal.

In 1994, the Department of Agrarian reform adopted new rules of procedure. As with the 1989 Rules, the 1994 Rules
maintained that decisions of RARADs and PARADs were reviewable by the Board upon a verified petition
for certiorari, which must have been preceded by the filing of a motion for reconsideration. Rule VIII, Section 3 of
these Rules stated:

SECTION 3. Totality of Case Assigned. — When a case is assigned to an Adjudicator, any or all incidents thereto
shall be considered assigned to him, and the same shall be disposed of in the same proceedings to avoid multiplicity
of suits or proceedings.

The order or resolution of the Adjudicator on any issue, question, matter or incident raised before them shall be valid
and effective until the hearing shall have been terminated and the case is decided on the merits, unless modified and
reversed by the Board upon a verified petition for certiorari which cannot be entertained without filing a motion for
reconsideration with the Adjudicator a quo within five (5) days from receipt of the order, subject of the petition. Such
interlocutory order shall not be the subject of an appeal.

In 2003 the Department of Agrarian Reform adopted new rules of procedure (the 2003 Rules) and again in 2009 (the
2009 Rules). Unlike the 1989 and 1994 Rules, the 2003 and 2009 Rules no longer made reference to certiorari  as
the Board's vehicle for reviewing decisions of RARADs and PARADs. Instead, they merely stated that, in pursuit of its
appellate jurisdiction, the Board has the power to "review, reverse, modify, alter, or affirm resolutions, orders and
decisions of the Adjudicators."[106]

The DARAB May 12, 2006 Resolution subject of the present appeal, which gave rise to the assailed Court of Appeals

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July 23, 2012 Decision, was issued in response to a pleading specifically denominated as a "petition for certiorari" by
respondent Landbank:

This is a petition for certiorari pursuant to paragraph 2, Section 3, Rule VIII of the DARAB New Rules of Procedure
seeking to annul and set aside the Order dated January 16, 2001 (sic) as well as the Alias Writ of Execution dated
February 15, 2000 issued by respondent RARAD Miñas.[107]

In conformity with the relief sought by Landbank's petition for certiorari,  the DARAB May 12, 2006 Resolution
"annulled" the January 16, 2001 Order and the February 15, 2001 Alias Writ of Execution issued by Regional
Adjudicator Miñas:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Order dated 16 January 2001 and an
Alias Writ of Execution dated 15 February 2001 pursuant to the Decision in DARAB Case No. V-0412-0339-98 dated
03 October 2000 is hereby ANNULLED and herein public respondent is hereby ordered to withdraw the same.

SO ORDERED.[108]

In its assailed July 23, 2012 Decision, the Court of Appeals justified DARAB's favorable action on Landbank's petition
for certiorari by referencing DARAB's appellate jurisdiction over and supervision of RARADs:

In Department of Agrarian Reform Adjudication Board vs. Court of Appeals, the Supreme Court observed, based on
the provisions aforecited, that:

... the DAR's exclusive original jurisdiction (as set forth in Section 50 of the CARL) is exercised through hierarchically
arranged agencies, namely, the DARAB, RARAD and PARAD. The latter two exercise "delegated authority," while
the first exercises appellate jurisdiction over resolutions, orders, decisions and other dispositions of the RARAD and
the PARAD.

In other words, respondent DARAB which has appellate jurisdiction over the resolutions and orders of RARAD and
PARAD acted within the ambit of law when it annulled the highly irregular orders of the regional adjudicator allowing
the issuance of a writ of execution for the purpose of enforcing the latter's October 3, 2000 Decision notwithstanding
the glaring fact that the same has not yet become final and executory in view of [Landbank]'s appeal to the Special
Agrarian Court in Lucena concerning the issue on the determination of the correct value of the just compensation of
the subject property. The Supreme Court recognizes the supervisory authority of the DARAB over its delegates,
namely, the RARADs and PARADs.[109]

The Court of Appeals may have been correct in noting that DARAB has supervisory authority over RARADs, but it
was mistaken in using it as basis for sanctioning DARAB's exercise of certiorari powers.

In Department of Agrarian Reform Adjudication Board v. Lubrica,[110] DARAB similarly pleaded its authority over and
supervision of RARADs as crafting an exception to the need for an express constitutional or statutory grant of
jurisdiction. This Court rebuffed DARAB's reasoning:

DARAB takes exception to the general rule that jurisdiction over special civil actions must be expressly conferred by
law before a court or tribunal can take cognizance thereof. It believes that this principle is applicable only in cases
where the officials/entities contemplated to be subject thereof are not within the administrative power/competence, or
in any manner under the control or supervision, of the issuing authority.

This Court is not persuaded. The function of a writ of certiorari is to keep an inferior court within the bounds of its
jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to excess of jurisdiction. In
the instant case, the RARAD issued the order of finality and the writ of execution upon the belief that its decision had
become final and executory, as authorized under Section 1, Rule XII of the DARAB Rules of Procedure. It is worth
noting that in its petition, DARAB maintains that in preventing the RARAD from implementing its decision, it merely

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"exercised its residual power of supervision, to insure that the RARAD acted within the bounds of delegated authority
and/or prevent/avoid her from committing grave and serious disservice to the Program." DARAB's action, therefore, is
a rectification of what it perceived as an abuse of the RARAD's jurisdiction. By its own admission, DARAB took upon
itself the power to correct errors of jurisdiction which is ordinarily lodged with the regular courts by virtue of express
constitutional grant or legislative enactments.

This Court recognizes the supervisory authority of the DARAB over its delegates, namely, the RARADs and PARADs,
but the same should be exercised within the context of administrative supervision and/or control. In the event that the
RARADs or PARADs act beyond its adjudicatory functions, nothing prevents the aggrieved party from availing of the
extraordinary remedy of certiorari, which is ordinarily within the jurisdiction of the regular courts.

That the statutes allowed the DARAB to adopt its own rules of procedure does not permit it with unbridled discretion
to grant itself jurisdiction ordinarily conferred only by the Constitution or by law. Procedure, as distinguished from
jurisdiction, is the means by which the power or authority of a court to hear and decide a class of cases is put into
action. Rules of procedure are remedial in nature and not substantive. They cover only rules on pleadings and
practice.[111] (Citations omitted)

DARAB's reasoning failed to impress then; the same reasoning fails to impress now.

Not only are mere procedural rules incapable of supplanting a constitutional or statutory grant of jurisdiction, no
amount of textual wrangling negates the basic truth that DARAB is an administrative agency belonging to the
Executive, and not to the Judicial branch, of our government.

Determining whether an action was made without or in excess of jurisdiction or with grave abuse of discretion is a
judicial question. In a petition for certiorari where these issues are raised, the public officers or state organs
exercising judicial or quasi-judicial powers are impleaded as respondents. They themselves become party-litigants
and it is their own legal rights that are the subject of adjudication. A consideration of law is impelled to delineate their
proper rights and prerogatives. The controversy that ensues is inexorably beyond the competence of administrative
agencies. When presented with such a controversy, an administrative agency must recuse and yield to courts of law.

Well-meaning intentions at rectifying a perceived breach of authority cannot be cured by an actual breach of
authority. As It was in DARAB v. Lubrica,  so it is true here that DARAB's avowed good intentions cannot justify its
exercise of powers that were never meant for it to exercise.

DARAB's exercise of the innately judicial certiorari  power is an executive encroachment into the judiciary. It violates
the separation of powers; it is unconstitutional.

With or without a law enabling it, DARAB has no power to rule on jurisdictional controversies via petitions
for certiorari. DARAB's self-serving grant to itself of the power to issue writs of certiorari in the 1994 DARAB New
Rules of Procedure is itself a grave abuse of discretion amounting to lack or excess of jurisdiction. It must be annulled
for running afoul of the Constitution.

VI

It should suffice, to settle the present controversy, for us to state, as this Court did, that under no circumstance may
an administrative agency arrogate unto itself the power of judicial review and to take cognizance of petitions
for certiorari. However, it does not also escape our attention that the predicament that respondent Landbank finds
itself in is no less the result of its own unrefined legal maneuver.

Landbank rendered ineffectual its own immediate recourse to the Special Agrarian Court. Before the Special Agrarian
Court, it sought to restrain the looming actions of DARAB, acting through its RARAD, to enforce a judgment. Despite
this, it still failed to implead DARAB as a respondent. Landbank's own oversight left the Special Agrarian Court with
no reasonable recourse but the denial of Landbank's plea.

Failing at obtaining relief from the Special Agrarian Court, Landbank sought relief from an entirely different forum.
Strikingly, this new forum is the same entity that it should have first impleaded as an adverse party before the Special

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Agrarian Court. Before this forum, it would then seek the issuance of what this Court long ago declared in Lubrica  to
be an unfounded—and what this Court is affirming now to be an unconstitutional—relief.

In keeping with our most basic constitutional principles and as a consequence of Landbank's own failings, this Court
must sustain the petitioners' position.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July 23, 2012 Decision and January
9, 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 113235 are REVERSED and SET ASIDE. Respondent
Department of Agrarian Reform Adjudication Board is ordered to dismiss the Petition for Certiorari, docketed as
DSCA 0219, filed before it by respondent Land Bank of the Philippines.

SO ORDERED.

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 SPECIAL THIRD DIVISION

[G.R. No. 182645 : June 22, 2011]

IN THE MATTER OF THE HEIRSHIP (INTESTATE ESTATES) OF THE LATE HERMOGENES

RODRIGUEZ, ANTONIO RODRIGUEZ, MACARIO J. RODRIGUEZ, DELFIN RODRIGUEZ, AND
CONSUELO M. RODRIGUEZ AND SETTLEMENT OF THEIR ESTATES, RENE B. PASCUAL,
PETITIONER, VS. JAIME M. ROBLES, RESPONDENT.

DECISION

PERALTA,  J.:

On December 15, 2010, this Court promulgated a Resolution 1 which set aside its Decision 2 earlier
issued on December 4, 2009 on the ground that herein petitioner, Rene B. Pascual failed to implead
herein respondent Jaime M. Robles, who is an indispensable party to the present case.

After receiving respondent's Comment and Opposition, 3 as well as petitioner's Reply 4 thereto, the
Court will now proceed to determine the merits of the instant petition for certiorari.

Again, the Court finds it apropros to restate the pertinent antecedent facts and proceedings as set
forth in the December 4, 2009 Decision as well as in the December 15, 2010 Resolution, to wit:

On 14 September 1989, a petition for Declaration of Heirship and Appointment of Administrator and
Settlement of the Estates of the Late Hermogenes Rodriguez (Hermogenes) and Antonio Rodriguez
(Antonio) was filed before the [Regional Trial Court] RTC [of Iriga City]. The petition, docketed as
Special Proceeding No. IR-1110, was filed by Henry F. Rodriguez (Henry), Certeza F. Rodriguez
(Certeza), and Rosalina R. Pellosis (Rosalina). Henry, Certeza and Rosalina sought that they be
declared the sole and surviving heirs of the late Antonio Rodriguez and Hermogenes Rodriguez. They
alleged they are the great grandchildren of Antonio based on the following genealogy: that Henry and
Certeza are the surviving children of Delfin M. Rodriguez (Delfin) who died on 8 February 1981, while
Rosalina is the surviving heir of Consuelo M. Rodriguez (Consuelo); that Delfin and Consuelo were the
heirs of Macario J. Rodriguez (Macario) who died in 1976; that Macario and Flora Rodriguez were the
heirs of Antonio; that Flora died without an issue in 1960 leaving Macario as her sole heir.

Henry, Certeza and Rosalina's claim to the intestate estate of the late Hermogenes Rodriguez, a
former gobernadorcillo, is based on the following lineage: that Antonio and Hermogenes were brothers
and the latter died in 1910 without issue, leaving Antonio as his sole heir.

At the initial hearing of the petition on 14 November 1989, nobody opposed the petition. Having no
oppositors to the petition, the RTC entered a general default against the whole world, except the
Republic of the Philippines. After presentation of proof of compliance with jurisdictional requirements,
the RTC allowed Henry, Certeza and Rosalina to submit evidence before a commissioner in support of
the petition. After evaluating the evidence presented, the commissioner found that Henry, Certeza and
Rosalina are the grandchildren in the direct line of Antonio and required them to present additional
evidence to establish the alleged fraternal relationship between Antonio and Hermogenes.

Taking its cue from the report of the commissioner, the RTC rendered a Partial Judgment dated 31
May 1990 declaring Henry, Certeza and Rosalina as heirs in the direct descending line of the late
Antonio, Macario and Delfin and appointing Henry as regular administrator of the estate of the
decedents Delfin, Macario and Antonio, and as special administrator to the estate of Hermogenes.

Henry filed the bond and took his oath of office as administrator of the subject estates.

Subsequently, six groups of oppositors entered their appearances either as a group or individually,
namely:

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(1) The group of Judith Rodriguez;
(2) The group of Carola Favila-Santos;
(3) Jaime Robles;
(4) Florencia Rodriguez;
(5) Victoria Rodriguez; and
(6) Bienvenido Rodriguez

Only the group of Judith Rodriguez had an opposing claim to the estate of Antonio, while the rest filed
opposing claims to the estate of Hermogenes.

In his opposition, Jaime Robles likewise prayed that he be appointed regular administrator to the
estates of Antonio and Hermogenes and be allowed to sell a certain portion of land included in the
estate of Hermogenes covered by OCT No. 12022 located at Barrio Manggahan, Pasig, Rizal.

After hearing on Jamie Robles' application for appointment as regular administrator, the RTC issued an
Order dated 15 December 1994 declaring him to be an heir and next of kin of decedent Hermogenes
and thus qualified to be the administrator. Accordingly, the said order appointed Jaime Robles as
regular administrator of the entire estate of Hermogenes and allowed him to sell the property covered
by OCT No. 12022 located at Barrio Manggahan, Pasig Rizal.

On 27 April 1999, the RTC rendered a decision declaring Carola Favila-Santos and her co-heirs as
heirs in the direct descending line of Hermogenes and reiterated its ruling in the partial judgment
declaring Henry, Certeza and Rosalina as heirs of Antonio. The decision dismissed the oppositions of
Jamie Robles, Victoria Rodriguez, Bienvenido Rodriguez, and Florencia Rodriguez, for their failure to
substantiate their respective claims of heirship to the late Hermogenes.

On 13 August 1999, the RTC issued an Amended Decision reversing its earlier finding as to Carola
Favila-Santos. This time, the RTC found Carola Favila-Santos and company not related to the decedent
Hermogenes. The RTC further decreed that Henry, Certeza and Rosalina are the heirs of Hermogenes.
The RTC also re-affirmed its earlier verdict dismissing the oppositions of Jaime Robles, Victoria
Rodriguez, Bienvenido Rodriguez, and Florencia Rodriguez. 5

Robles then appealed the August 13, 1999 Decision of the RTC by filing a notice of appeal, but the
same was denied by the trial court in its Order dated November 22, 1999 for Robles' failure to file a
record on appeal.

Robles questioned the denial of his appeal by filing a petition for review on certiorari with this Court.

In a Resolution dated February 14, 2000, this Court referred the petition to the [Court of Appeals
(CA)] for consideration and adjudication on the merits on the ground that the said court has
jurisdiction concurrent with this Court and that no special and important reason was cited for this
Court to take cognizance of the said case in the first instance.

On April 16, 2002, the CA rendered judgment annulling the August 13, 1999 Amended Decision of the
RTC.

Henry Rodriguez (Rodriguez) and his group moved for the reconsideration of the CA decision, but the
same was denied in a Resolution dated January 21, 2004.  Rodriguez and his co-respondents did not
appeal the Decision and Resolution of the CA.

On the other hand, Robles filed an appeal with this Court assailing a portion of the CA Decision. On
August 1, 2005, this Court issued a Resolution denying the petition of Robles and, on November 10,
2005, the said Resolution became final and executory.

On May 13, 2008, the instant petition was filed. 6

Petitioner posits the following reasons relied upon for the allowance of his petition:

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 I

THE HONORABLE COURT OF APPEALS' DECISION DATED APRIL 16, 2002 WAS ISSUED IN GRAVE
ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION, HENCE, A PATENT
NULLITY.

II

THE ORDER DATED FEBRUARY 21, 2007 ISSUED BY THE HONORABLE REGIONAL TRIAL COURT,
BRANCH 34, IRIGA CITY, BASED ON THE COURT OF APPEALS' APRIL 16, 2002 DECISION WAS
ISSUED IN GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION,
HENCE, A PATENT NULLITY.

III

THE AFOREMENTIONED COURT OF APPEALS' APRIL 16, 2002 DECISION AND FEBRUARY 21, 2007
ORDER OF THE REGIONAL TRIAL COURT, BRANCH 34, IRIGA CITY, WERE NULL AND VOID AB
INITIO AS THEY CONTRAVENED, INCONSISTENT WITH AND CONTRADICTORY TO THE FINAL AND
EXECUTORY DECISIONS AND RESOLUTIONS OF THE SUPREME COURT, WHICH IS IN GROSS
VIOLATION OF THE RULE THAT ALL COURTS SHOULD TAKE THEIR BEARINGS FROM THE SUPREME
COURT. 7

The Court finds that there are compelling reasons to dismiss the present petition, as discussed below.

First, petitioner has no personality to file the instant petition. The requirement of personality is
sanctioned by Section 1, Rule 65 of the Rules of Court, which essentially provides that a person
aggrieved by any act of a tribunal, board or officer exercising judicial or quasi-judicial functions
rendered without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction may file a petition for certiorari. 8

This Court has held that:

An aggrieved party under Section 1, Rule 65 [of the Rules of Court] is one who was a party to the
original proceedings that gave rise to the original action for certiorari under Rule 65. x x x.

Although Section 1 of Rule 65 provides that the special civil action of certiorari may be availed of by a
"person aggrieved" by the orders or decisions of a tribunal, the term "person aggrieved" is not to
be construed to mean that any person who feels injured by the lower court's order or
decision can question the said court's disposition via certiorari.  To sanction a contrary
interpretation would open the floodgates to numerous and endless litigations which would undeniably
lead to the clogging of court dockets and, more importantly, the harassment of the party who
prevailed in the lower court.

In a situation wherein the order or decision being questioned underwent adversarial proceedings
before a trial court, the "person aggrieved" referred to under Section 1 of Rule 65 who can avail of the
special civil action of certiorari  pertains to one who was a party in the proceedings before the lower
court. The correctness of this interpretation can be gleaned from the fact that a special civil action
for certiorari may be dismissed motu proprio if the party elevating the case failed to file a motion for
reconsideration of the questioned order or decision before the lower court. Obviously, only one who
was a party in the case before the lower court can file a motion for reconsideration since a stranger to
the litigation would not have the legal standing to interfere in the orders or decisions of the said court.
In relation to this, if a non-party in the proceedings before the lower court has no standing to
file a motion for reconsideration, logic would lead us to the conclusion that he would
likewise have no standing to question the said order or decision before the appellate court
via certiorari. 9

Thus, a person not a party to the proceedings in the trial court or in the CA cannot maintain an action

324 | P a g e
for certiorari in the Supreme Court to have the judgment reviewed. 10 Stated differently, if a petition
for certiorari or prohibition is filed by one who was not a party in the lower court, he has no standing
to question the assailed order. 11

In the present case, petitioner was never a party to the proceedings in the RTC and the CA.  In fact,
he admits that he is a third party insofar as the instant case is concerned. There is no dispute that it
was only in January 2005 that he acquired interest in a portion of the properties subject of the estate
proceedings when he bought a real property located in San Fernando, Pampanga, which belonged to
the Rodriguez estate.  Petitioner claims that he filed the instant petition for certiorari only after
learning of the assailed Decision of the CA and the Order of the RTC on March 13, 2008, implying that
he could not have intervened earlier.  This, however, is not an excuse or justification to allow
petitioner to file the instant petition.  To do so would put into the hands of the litigants in a case the
power to resurrect or to introduce anew, with the assistance of intervenors, issues to a litigation which
have already been long settled on appeal.

Indeed, petitioner may not be allowed to intervene at this late a stage.  Section 2, Rule 19 of the
Rules of Court clearly provides that a motion to intervene may be filed at any time before rendition
of judgment by the trial court.

In The Learning Child, Inc. v. Ayala Alabang Village Association, 12 this Court's disquisition on the
significance of the abovementioned Section is instructive, to wit:

This section is derived from the former Section 2, Rule 12, which then provided that the motion to
intervene may be filed "before or during a trial." Said former phraseology gave rise to ambiguous
doctrines on the interpretation of the word "trial," with one decision holding that said Motion may be
filed up to the day the case is submitted for decision, while another stating that it may be filed at any
time before the rendition of the final judgment. This ambiguity was eliminated by the present Section
2, Rule 19 by clearly stating that the same may be filed "at any time before rendition of the judgment
by the trial court," in line with the second doctrine above-stated. The clear import of the amended
provision is that intervention cannot be allowed when the trial court has already rendered its Decision,
and much less, as in the case at bar, when even the Court of Appeals had rendered its own Decision
on appeal. 13

In his book on remedial law, former Supreme Court Associate Justice Florenz D. Regalado explained
the rationale behind the amendments introduced in Section 2, Rule 19 of the Rules of Court as
follows:

The justification advanced for this is that before judgment is rendered, the court for good cause
shown, may still allow the introduction of additional evidence and that is still within a liberal
interpretation of the period for trial. Also, since no judgment has yet been rendered, the matter
subject of the intervention may still be readily resolved and integrated in the judgment disposing of all
claims in the case, and would not require an overall reassessment of said claims as would be the case
if the judgment had already been rendered. 14

It is also worthy to note that the disputed Decision was promulgated way back on April 16, 2002.  The
respondents in the said case, namely, Henry Rodriguez, Certeza Rodriguez and Rosalina Pellosis, did
not appeal. Herein respondent, on the other hand, who was the petitioner in the case, filed a petition
for review on certiorari with this Court assailing a portion of the CA Decision.  However, the petition
was denied via a Resolution issued by the Court dated August 1, 2005, and that the same had become
final and executory on November 10, 2005.  Hence, by the time herein petitioner filed the instant
petition on the sole basis that he acquired an interest in a portion of the disputed estate, the assailed
CA Decision had long become final and executory.

In Mocorro, Jr. v. Ramirez, 15 this Court reiterated the long-standing rule governing finality of
judgments, to wit:

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A decision that has acquired finality becomes immutable and unalterable. This quality of immutability
precludes the modification of a final judgment, even if the modification is meant to correct erroneous
conclusions of fact and law.  And this postulate holds true whether the modification is made by the
court that rendered it or by the highest court in the land. The orderly administration of justice requires
that, at the risk of occasional errors, the judgments/resolutions of a court must reach a point of
finality set by the law.  The noble purpose is to write finis to dispute once and for all. This is a
fundamental principle in our justice system, without which there would be no end to litigations. x x x

The only exceptions to the rule on the immutability of final judgments are (1) the correction of clerical
errors, (2) the so-called nunc pro tunc entries which cause no prejudice to any party, and (3) void
judgments. x x x 16

Unlike the August 13, 1999 Amended Decision of the RTC, Iriga City, Branch 34, which was found by
the CA to be a complete nullity, there is no showing that the instant case falls under any of the
exceptions enumerated above.

Considering the foregoing, the Court no longer finds it necessary to address the issues raised by
petitioner.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit.

SO ORDERED.

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 THIRD DIVISION

G.R. No. 196894               March 3, 2014

JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO, Petitioners,

vs.
JEWM AGRO-INDUSTRIAL CORPORATION, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court challenging the May 6,
2011 Decision  of the Court of Appeals (CA), in CA-G.R. SP No. 03896-MIN, which affirmed the
1

September 27, 2010,  October 7, 2010  and November 9, 2010  Orders of the Regional Trial Court,
2 3 4

Davao City, Branch 14 (RTC-Br. 14), in Civil Case No. 33,551-2010, an action for Cancellation of
Lien. It is entitled "JEWM Agro-Industrial Corporation v. The Registry of Deeds for the City of Davao.
Sheriff Robert Medialdea. John & Jane Does. and all persons acting under their directions.

This controversy stemmed from various cases of collection for sum of money filed against So Keng
Kok, the owner of various properties including two (2) parcels of land covered by TCT Nos. 292597
and 292600 (subject properties), which were attached by various creditors including the petitioners
in this case. As a result, the levies were annotated on the back of the said titles.

Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses Crisologo) were the plaintiffs in
two (2) collection cases before RTC, Branch 15, Davao City (RTC-Br. 15), docketed as Civil Case
Nos. 26,810-98 and 26,811-98, against Robert Limso, So Keng Koc, et al. Respondent JEWM Agro-
Industrial Corporation (JEWM) was the successor-in-interest of one Sy Sen Ben, the plaintiff in
another collection case before RTC, Branch 8, Davao City (RTC-Br. 8), docketed as Civil Case No.
26,513-98, against the same defendants.

On October 19, 1998, RTC-Br. 8 rendered its decision based on a compromise agreement, dated
October 15, 1998, between the parties wherein the defendants in said case were directed to transfer
the subject properties in favor of Sy Sen Ben. The latter subsequently sold the subject properties to
one Nilda Lam who, in turn, sold the same to JEWM on June 1, 2000. Thereafter, TCT Nos. 325675
and 325676 were eventually issued in the name of JEWM, both of which still bearing the same
annotations as well as the notice of lis pendens in connection with the other pending cases filed
against So Keng Kok.

A year thereafter, Spouses Crisologo prevailed in the separate collection case filed before RTC-Br.
15 against Robert Lim So and So Keng Koc (defendants). Thus, on July 1, 1999, the said
defendants were ordered to solidarily pay the Spouses Crisologo. When this decision attained
finality, they moved for execution. On June 15, 2010, a writ was eventually issued.
Acting on the same, the Branch Sheriff issued a notice of sale scheduling an auction on August 26,
2010. The notice of sale included, among others, the subject properties covered by TCT Nos.
325675 and 325676, now, in the name of JEWM.

In the same proceedings, JEWM immediately filed its Affidavit of Third Party Claim and the Urgent
Motion Ad Cautelam. It prayed for the exclusion of the subject properties from the notice of sale. In

327 | P a g e
an order, dated August 26, 2010, however, the motion was denied. In turn, the Spouses Crisologo
posted a bond in order to proceed with the execution.

To protect its interest, JEWM filed a separate action for cancellation of lien with prayer for the
issuance of a preliminary injunction before RTC-Br. 14, docketed as Civil Case No. 33,551-2010. It
prayed for the issuance of a writ of preliminary injunction to prevent the public sale of the subject
properties covered in the writ of execution issued pursuant to the ruling of RTC-Br. 15; the
cancellation of all the annotations on the back of the pertinent TCTs; and the issuance of a
permanent injunction order after trial on the merits. "The Register of Deeds of Davao City, Sheriff
Robert Medialdea, John and Jane Does and all persons acting under their direction" were impleaded
as defendants.

At the scheduled hearing before RTC-Br. 14 on September 22, 2010, Spouses Crisologo’s counsel
appeared and filed in open court their Very Urgent Manifestation questioning the authority of the said
court to restrain the execution proceedings in RTC-Br. 15. JEWM opposed it on the ground that
Spouses Crisologo were not parties in the case.

On September 24, 2010, Spouses Crisologo filed an Omnibus Motion praying for the denial of the
application for writ or preliminary injuction filed by JEWM and asking for their recognition as parties.
No motion to intervene was, however, filed as the Spouses Crisologo believed that it was
unnecessary since they were already the John and Jane Does named in the complaint.

In the Order, dated September 27, 2010, RTC-Br. 14 denied Spouses Crisologo’s Omnibus Motion
and granted JEWM’s application for a writ of preliminary injunction.

On October 1, 2010, Spouses Crisologo filed a Very Urgent Omnibus Motion before RTC-Br. 14
praying for reconsideration and the setting aside of its September 27, 2010 Order. This was denied
in the RTC Br.-14’s October 7, 2010 Order for lack of legal standing in court considering that their
counsel failed to make the written formal notice of appearance. The copy of this order was received
by Spouses Crisologo on October 22, 2010. It must be noted, however, that on October 27, 2010,
they received another order, likewise dated October 7, 2010, giving JEWM time to comment on their
Very Urgent Omnibus Motion filed on October 1, 2010. In its Order, dated November 9, 2010,
however, RTC-Br. 14 again denied the Very Urgent Motion previously filed by Spouses Crisologo.

On November 12, 2010, JEWM moved to declare the "defendants" in default which was granted in
an order given in open court on November 19, 2010.

Spouses Crisologo then filed their Very Urgent Manifestation, dated November 30, 2010, arguing
that they could not be deemed as defaulting parties because they were not referred to in the
pertinent motion and order of default.

On November 19, 2010, Spouses Crisologo filed with the CA a petition for certiorari  under Rule 65
5

of the Rules of Court assailing the RTC-Br. 14 orders, dated September 27, 2010, October 7, 2010
and November 9, 2010, all of which denied their motion to be recognized as parties. They also
prayed for the issuance of a Temporary Restraining Order (TRO) and/or a Writ of Preliminary
Injunction.

In its Resolution, dated January 6, 2011, the CA denied the application for a TRO, but directed
Spouses Crisologo to amend their petition. On January 19, 2011, the Spouses Crisologo filed their
Amended Petition  with prayers for the issuance of a TRO and/or writ of preliminary injunction, the
6

annulment of the aforementioned orders of RTC Br. 14, and the issuance of an order dissolving the
writ of preliminary injunction issued in favor of JEWM.

328 | P a g e
Pending disposition of the Amended Petition by the CA, JEWM filed a motion on December 6, 2010
before RTC-Br. 14 asking for the resolution of the case on the merits.

On January 10, 2011, RTC-Br. 14 ruled in favor of JEWM, with the dispositive portion of its
Decision  stating as follows:
7

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff as
follows:

1. the preliminary writ of injunction issued on October 5, 2010 is hereby made permanent;

2. directing herein defendant Registry of Deeds of Davao City where the subject lands are
located, to cancel all existing liens and encumbrances on TCT No. T-325675 and T-325676
registered in the name of the plaintiff, and pay the

3. cost of suit.

SO ORDERED. 8

Spouses Crisologo then filed their Omnibus Motion Ex Abudanti ad Cautelam, asking RTC- Br. 14 to
reconsider the above decision. Because no motion for intervention was filed prior to the rendition of
the judgment, a certificate, dated March 17, 2011, was issued declaring the January 10, 2011
decision final and executory.

On May 6, 2011, the CA eventually denied the Amended Petition filed by Spouses Crisologo for lack
of merit. It ruled that the writ of preliminary injunction subject of the petition was already fait accompli
and, as such, the issue of grave abuse of discretion attributed to RTC-Br. 14 in granting the relief
had become moot and academic. It further held that the failure of Spouses Crisologo to file their
motion to intervene under Rule 19 rendered Rule 65 inapplicable as a vehicle to ventilate their
supposed right in the case. 9

Hence, this petition.

ISSUES

I. The Court of Appeals erred in holding that the action for Cancellation of Annotations may
proceed even without notice to and impleading the party/ies who caused the annotations, in
clear contravention of the rule on joinder of parties and basic due process.

II. The Court of Appeals erred in applying a very constrictive interpretation of the rules in
holding that a motion to intervene is the only way an otherwise real party in interest could
participate.

III. The Court of Appeals erred in denying our application for the issuance of a temporary
restraining order and/or a writ of preliminary injunction.

IV. The Court of Appeals erred in holding that the issues raised by petitioners before it [had]
been mooted by the January 10, 2011 decision of RTC Branch 14. 10

Spouses Crisologo submit as error the CA affirmation of the RTC- Br. 14 ruling that the action for
cancellation may proceed without them being impleaded. They allege deprivation of their right to due

329 | P a g e
process when they were not impleaded in the case before RTC-Br. 14 despite the claim that they
stand, as indispensable parties, to be benefited or injured by the judgment in the action for the
cancellation of annotations covering the subject properties. They cite Gonzales v. Judge
Bersamin,  among others, as authority. In that case, the Court ruled that pursuant to Section 108 of
11

Presidential Decree (P.D.) No. 1529, notice must be given to all parties in interest before the court
may hear and determine the petition for the cancellation of annotations on the certificates of title.

The Spouses Crisologo also question the statement of the CA that their failure to file the motion to
intervene under Rule 19 before RTC-Br. 14 barred their participation in the cancellation proceedings.
They put emphasis on the court’s duty to, at the very least, suspend the proceedings before it and
have such indispensable parties impleaded.

As to the ruling on the denial of their application for the issuance of a TRO or writ of preliminary
injunction, Spouses Crisologo claim that their adverse interest, evinced by the annotations at the
back of the certificates of title, warranted the issuance of a TRO or writ of preliminary injunction
against JEWM’s attempt to cancel the said annotations in violation of their fundamental right to due
process.

Lastly, Spouses Crisologo cast doubt on the CA ruling that the issues presented in their petition
were mooted by the RTC-Br. 14 Decision, dated January 10, 2011. Having been rendered without
impleading indispensable parties, the said decision was void and could not have mooted their
petition.

In their Comment,  JEWM asserts that Spouses Crisologo’s failure to file a motion to intervene,
12

pleadings-in-intervention, appeal or annulment of judgment, which were plain, speedy and adequate
remedies then available to them, rendered recourse to Rule 65 as improper; that Spouses Crisologo
lacked the legal standing to file a Rule 65 petition since they were not impleaded in the proceedings
before RTC-Br. 14; and that Spouses Crisologo were not indispensable parties since their rights
over the properties had been rendered ineffective by the final and executory October 19, 1998
Decision of RTC-Br. 8 which disposed unconditionally and absolutely the subject properties in favor
of its predecessor-in-interest.

JEWM further argues that, on the assumption that Section 108 of P.D. No. 1529 applies, no notice to
Spouses Crisologo was required because they were not real parties-in-interest in the case before
RTC-Br. 14, or even if they were, their non-participation in the proceedings was because of their
failure to properly intervene pursuant to Rule 19; and, lastly, that the case before RTC-Br. 14
became final and executory because Spouses Crisologos did not perfect an appeal therefrom, thus,
rendering the issues in the CA petition moot and academic.

In their Reply,  Spouses Crisologo restate the applicability of Section 108 of P.D. No. 1529 to the
13

effect that any cancellation of annotation of certificates of title must be carried out by giving notice to
all parties-in-interest. This they forward despite their recognition of the mootness of their assertion
over the subject properties, to wit:

Again, we respect JAIC’s position that "the claims of subsequent attaching creditors (including
petitioners’) have been rendered moot and academic, and hence the entries in favor of said creditors
have no more legal basis and therefore must be cancelled." But we likewise at least ask a modicum
of respect by at least being notified and heard. 14

The Ruling of the Court

330 | P a g e
The crux of this controversy is whether the CA correctly ruled that RTC-Br. 14 acted without grave
abuse of discretion in failing to recognize Spouses Crisologo as indispensable parties in the case for
cancellation of lien.

In this respect, the Court agrees with Spouses Crisologo.

In an action for the cancellation of memorandum annotated at the back of a certificate of title, the
persons considered as indispensable include those whose liens appear as annotations pursuant to
Section 108 of P.D. No. 1529,  to wit:
15

Section 108. Amendment and alteration of certificates. -No erasure, alteration or amendment shall
be made upon the registration book after the entry of a certificate of title or of a memorandum
thereon and the attestation of the same by the Register of Deeds, except by order of the proper
Court of First Instance. A registered owner or other person having an interest in registered property,
or, in proper cases, the Register of Deeds with the approval of the Commissioner of Land
Registration, may apply by petition to the court upon the ground that the registered interests of any
description, whether vested, contingent, expectant inchoate appearing on the certificate, have
terminated and ceased; or that new interest not appearing upon the certificates have arisen or been
created; or that an omission or error was made in entering a certificate or memorandum thereon, or
on any duplicate certificate; x x x or upon any other reasonable ground; and the court may hear and
determine the petition after notice to all parties in interest, and may order the entry or cancellation of
a new certificate, the entry or cancellation of a memorandum upon a certificate, or grant any other
relief upon such terms and conditions, requiring security or bond if necessary, as it may consider
proper.

In Southwestern University v. Laurente,  the Court held that the cancellation of the annotation of an
16

encumbrance cannot be ordered without giving notice to the parties annotated in the certificate of
title itself. It would, thus, be an error for a judge to contend that no notice is required to be given to all
the persons whose liens were annotated at the back of a certificate of title.

Here, undisputed is the fact that Spouses Crisologo’s liens were indeed annotated at the back of
TCT Nos. 325675 and 325676. Thus, as persons with their liens annotated, they stand to be
benefited or injured by any order relative to the cancellation of annotations in the pertinent TCTs. In
other words, they are as indispensable as JEWM itself in the final disposition of the case for
cancellation, being one of the many lien holders.

As indispensable parties, Spouses Crisologo should have been joined as defendants in the case
pursuant to Section 7, Rule 3 of the Rules of Court, to wit:

SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants. 17

The reason behind this compulsory joinder of indispensable parties is the complete determination of
all possible issues, not only between the parties themselves but also as regards other persons who
may be affected by the judgment. 18

In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be recognized as
indispensable parties, failed to implement the mandatory import of the aforecited rule.

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In fact, in Sps. Crisologo v. Judge George E. Omelio,  a related administrative case, the Court found
19

the trial judge guilty of gross ignorance of the law when it disregarded the claims of Spouses
Crisologo to participate. In part, the Court stated:

This is not the first time Judge Omelio has rendered a decision affecting third parties’ interests,
without even notifying the indispensable parties. In the first disputed case, JEWM Agro-Industrial
Corporation v. Register of Deeds, Sheriff Medialdea, John & Jane Does and all persons acting under
their directions, Judge Omelio failed to cause the service of proper summons upon the John and
Jane Does impleaded in the complaint. Even when Sps. Crisologo voluntarily appeared in court to
be recognized as the John and Jane Does, Judge Omelio refused to acknowledge their appearance
and ordered the striking out of Sps. Crisologos' pleadings. For this reason, the Investigating Justice
recommended admonishing Judge Omelio for failing to recognize the Sps.Crisologo as
indispensable parties in that case.

x x x           x x x          x x x

Clearly, the cancellation of the annotation of the sale without notifying the buyers, Sps. Crisologo, is
a violation of the latter’s right to due process. Since this is the second time that Judge Omelio has
issued an order which fails to notify or summon the indispensable parties, we find Judge Omelio
guilty of gross ignorance of the law, with a warning that repetition of the same or similar act will merit
a stiffer penalty in the future.

xxx

WHEREFORE, … We find Judge George E. Omelio GUILTY of four counts of the serious charge of
gross ignorance of the law for the following acts: (a) refusing to recognize Spouses Jesus G.
Crisologo and Nannette B. Crisologo as indispensable parties; … in violation of the latter's right to
due process. Accordingly, we impose upon Judge George E. Omelio the penalty of fine of Forty
Thousand Pesos (₱40,000.00), with a warning that repetition of the same or similar acts will be dealt
with more severely.

SO ORDERED. 20

The trial court should have exercised prudence in denying Spouses Crisologo’s pleas to be
recognized as indispensable parties. In the words of the Court, "Judge Omelio should be penalized
for failing to recognize Sps. Crisologo as indispensable parties and for requiring them to file a motion
to intervene, considering that a simple perusal of the certificates of title would show Sps. Crisologo’s
adverse rights because their liens are annotated at the back of the titles." 21

This manifest disregard of the basic rules and procedures constitutes a grave abuse of discretion.

In State Prosecutors II Comilang and Lagman v. Judge Medel Belen,  the Court held as inexcusable
22

abuse of authority the trial judge’s "obstinate disregard of basic and established rule of law or
procedure." Such level of ignorance is not a mere error of judgment. It amounts to "evasion of a
positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation
of law,"  or in essence, grave abuse of discretion amounting to lack of jurisdiction.
23

Needless to say, judges are expected to exhibit more than just a cursory acquaintance with statutes
and procedural laws. They must know the laws and apply them properly in good faith as judicial
competence requires no less. 24

332 | P a g e
Despite the clear existence of grave abuse of discretion on the part of RTC-Br. 14, JEWM asserts
technical grounds on why the CA did not err in dismissing the petition via Rule 65. It states that:

a) The Crisologos could have used other available remedies such as intervention under Rule
19, an appeal of the judgment, or even an annulment of judgment, which are, by all means,
plain, speedy and adequate remedies in the ordinary course of law;

b) The Crisologos lack legal standing to file the Rule 65 petition since they were not
impleaded in the Branch 14 case.

The rule is that a petition for certiorari under Rule 65 is proper only if there is no appeal, or any plain
speedy, and adequate remedy in the ordinary course of law.

In this case, no adequate recourse, at that time, was available to Spouses Crisologo, except
resorting to Rule 65.

Although Intervention under Rule 19 could have been availed of, failing to use this remedy should
not prejudice Spouses Crisologo. It is the duty of RTC-Br. 14, following the rule on joinder of
indispensable parties, to simply recognize them, with or without any motion to intervene. Through a
cursory reading of the titles, the Court would have noticed the adverse rights of Spouses Crisologo
over the cancellation of any annotations in the subject TCTs.

Neither will appeal prove adequate as a remedy since only the original parties to an action can
appeal.  Here, Spouses Crisologo were never impleaded. Hence, they could not have utilized
25

appeal as they never possessed the required legal standing in the first place.

And even if the Court assumes the existence of the legal standing to appeal, it must be remembered
that the questioned orders were interlocutory in character and, as such, Spouses Crisologo would
have to wait, for the review by appeal, until the rendition of the judgment on the merits, which at that
time may not be coming as speedy as practicable. While waiting, Spouses Crisologo would have to
endure the denial of their right, as indispensable parties, to participate in a proceeding in which their
indispensability was obvious. Indeed, appeal cannot constitute an adequate, speedy and plain
remedy.

The same is also true if recourse to Annulment of Judgment under Rule 47 is made since this
remedy presupposes a final judgment already rendered by a trial court.

At any rate, the remedy against an interlocutory order, not subject of an appeal, is an appropriate
special civil action under Rule 65, provided that the interlocutory order is rendered without or in
excess of jurisdiction or with grave abuse of discretion. Only then is certiorari under Rule 65 allowed
to be resorted to. 26

This takes particular relevance in this case where, as previously discussed, RTC-Br. 14 acted with
grave abuse of discretion in not recognizing Spouses Crisologo as indispensable parties to the
pertinent action.

Based on the above, recourse to the CA via Rule 65 would have already been proper, except for one
last issue, that is, Spouses Crisologo’s legal standing to file the same. JEWM cites DBP v.
COA  where the Court held:
27

333 | P a g e
The petition for certiorari under Rule 65, however, is not available to any person who feels injured by
the decision of a tribunal, board or officer exercising judicial or quasi judicial functions. The ‘person
aggrieved’ under Section 1 of Rule 65 who can avail of the special civil action of certiorari pertains
only to one who was a party in the proceedings before the court a quo, or in this case before the
COA. To hold otherwise would open the courts to numerous and endless litigations.

Under normal circumstances, JEWM would be correct in their averment that the lack of legal
standing on the part of Spouses Crisologo in the case before RTC-Br. 14 prevents the latter’s
recourse via Rule 65.

This case, however, is an exception. In many instances, the Court has ruled that technical rules of
procedures should be used to promote, not frustrate the cause of justice. Rules of procedure are
tools designed not to thwart but to facilitate the attainment of justice; thus, their strict and rigid
application may, for good and deserving reasons, have to give way to, and be subordinated by, the
need to aptly dispense substantial justice in the normal cause. 28

Be it noted that the effect of their non-participation as indispensable parties is to preclude the
judgment, orders and the proceedings from attaining finality. Time and again, the Court has ruled
that the absence of an indispensable party renders all subsequent actions of the court null and void
for want of authority to act, not only as to the absent parties but even to those present.
Consequently, the proceedings before RTC-Br. 14 were null and void including the assailed orders,
which may be "ignored wherever and whenever it exhibits its head." 29

To turn a blind eye to the said nullity and, in turn, rule as improper the recourse to Rule 65 by the
lack of legal standing is to prolong the denial of due process to the persons whose interests are
indispensible to the final disposition of the case. It will only result in a protracted litigation as
Spouses Crisologo will be forced to rely on a petition for the annulment of judgment before the CA
(as the last remaining remedy), which may again reach this Court.  To prevent multiplicity of suits
1âwphi1

and to expedite the swift administration of justice, the CA should have applied liberality by striking
down the assailed orders despite the lack of legal standing on the part of Spouses Crisologo to file
the Rule 65 petition before it. Besides, this lacking requirement, of which Spouses Crisologo were
not even at fault, is precisely the reason why this controversy arose.

All told, the CA erred in dismissing the amended petition filed before it and in not finding grave abuse
of discretion on the part of RTC-Br. 14.

WHEREFORE, the petition is GRANTED. The May 6, 2011 Decision of the Court of Appeals is
NULLIFIED and SET ASIDE. The September 27, 2010, October 7, 2010 and November 9, 2010
Orders of the Regional Trial Court, Branch 14, Davao City, are likewise NULLIFIED and SET ASIDE.
Civil Case No. 33,551-2010 is hereby REMANDED to the trial court for further proceedings. The
respondent is ordered to implead all parties whose annotations appear at the back of Transfer
Certificate of Title Nos. 325675 and 325676.

SO ORDERED.

334 | P a g e
 EN BANC

G.R. No. 175723               February 4, 2014

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS. LIBERTY M.
TOLEDO, in her capacity as the City Treasurer of Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding Judge of the Regional Trial
Court, Branch 112, Pasay City; SM MART, INC.; SM PRIME HOLDINGS, INC.; STAR
APPLIANCES CENTER; SUPERVALUE, INC.; ACE HARDWARE PHILIPPINES, INC.; WATSON
PERSONAL CARE STORES, PHILS., INC.; JOLLIMART PHILS., CORP.; SURPLUS
MARKETING CORPORATION and SIGNATURE LINES, Respondents.

DECISION

PERALTA, J.:

Before the Court is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to
reverse and set aside the Resolutions  dated April 6, 2006 and November 29, 2006 of the Court of
1

Appeals (CA) in CA-G.R. SP No. 87948.

The antecedents of the case, as summarized by the CA, are as follows:

The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty Toledo,
assessed taxes for the taxable period from January to December 2002 against private respondents
SM Mart, Inc., SM Prime Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace Hardware
Philippines, Inc., Watsons Personal Care Stores Phils., Inc., Jollimart Philippines Corp., Surplus
Marketing Corp. and Signature Lines. In addition to the taxes purportedly due from private
respondents pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM),
said assessment covered the local business taxes petitioners were authorized to collect under
Section 21 of the same Code. Because payment of the taxes assessed was a precondition for the
issuance of their business permits, private respondents were constrained to pay the ₱19,316,458.77
assessment under protest.

On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay City] the
complaint denominated as one for "Refund or Recovery of Illegally and/or Erroneously-Collected
Local Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction"

which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at Branch
112]. In the amended complaint they filed on February 16, 2004, private respondents alleged that, in
relation to Section 21 thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the RRCM were violative of
the limitations and guidelines under Section 143 (h) of Republic Act. No. 7160 [Local Government
Code] on double taxation. They further averred that petitioner city's Ordinance No. 8011 which
amended pertinent portions of the RRCM had already been declared to be illegal and
unconstitutional by the Department of Justice. 2

In its Order  dated July 9, 2004, the RTC granted private respondents' application for a writ of
3

preliminary injunction.

335 | P a g e
Petitioners filed a Motion for Reconsideration  but the RTC denied it in its Order  dated October 15,
4 5

2004.

Petitioners then filed a special civil action for certiorari with the CA assailing the July 9, 2004 and
October 15, 2004 Orders of the RTC. 6

In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for certiorari
holding that it has no jurisdiction over the said petition. The CA ruled that since appellate jurisdiction
over private respondents' complaint for tax refund, which was filed with the RTC, is vested in the
Court of Tax Appeals (CTA), pursuant to its expanded jurisdiction under Republic Act No. 9282 (RA
9282), it follows that a petition for certiorari seeking nullification of an interlocutory order issued in the
said case should, likewise, be filed with the CTA.

Petitioners filed a Motion for Reconsideration,  but the CA denied it in its Resolution dated November
7

29, 2006.

Hence, the present petition raising the following issues:

I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the case for
lack of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in enjoining by issuing a Writ of Injunction the
petitioners, their agents and/or authorized representatives from implementing Section 21 of
the Revised Revenue Code of Manila, as amended, against private respondents.

III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in issuing the Writ of Injunction despite failure of
private respondents to make a written claim for tax credit or refund with the City Treasurer of
Manila.

IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction considering that under Section 21 of the Manila
Revenue Code, as amended, they are mere collecting agents of the City Government.

V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in issuing the Writ of Injunction because petitioner
City of Manila and its constituents would result to greater damage and prejudice thereof.
(sic)8

Without first resolving the above issues, this Court finds that the instant petition should be denied for
being moot and academic.

Upon perusal of the original records of the instant case, this Court discovered that a Decision  in the
9

main case had already been rendered by the RTC on August 13, 2007, the dispositive portion of
which reads as follows:

WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor of the
plaintiff and against the defendant to grant a tax refund or credit for taxes paid pursuant to Section
21 of the Revenue Code of the City of Manila as amended for the year 2002 in the following
amounts:

336 | P a g e
 To plaintiff SM Mart, Inc. - P 11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

To plaintiff Watsons Personal Care Health - 231,453.62

Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

TOTAL: - P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code of Manila
from herein plaintiff.

SO ORDERED. 10

The parties did not inform the Court but based on the records, the above Decision had already
become final and executory per the Certificate of Finality  issued by the same trial court on October
11

20, 2008. In fact, a Writ of Execution  was issued by the RTC on November 25, 2009. In view of the
12

foregoing, it clearly appears that the issues raised in the present petition, which merely involve the
incident on the preliminary injunction issued by the RTC, have already become moot and academic
considering that the trial court, in its decision on the merits in the main case, has already ruled in
favor of respondents and that the same decision is now final and executory. Well entrenched is the
rule that where the issues have become moot and academic, there is no justiciable controversy,
thereby rendering the resolution of the same of no practical use or value. 13

In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by petitioners
owing to its significance and for future guidance of both bench and bar. It is a settled principle that
courts will decide a question otherwise moot and academic if it is capable of repetition, yet evading
review.14

However, before proceeding, to resolve the question on jurisdiction, the Court deems it proper to
likewise address a procedural error which petitioners committed.

Petitioners availed of the wrong remedy when they filed the instant special civil action for certiorari
under Rule 65 of the Rules of Court in assailing the Resolutions of the CA which dismissed their
petition filed with the said court and their motion for reconsideration of such dismissal. There is no

337 | P a g e
dispute that the assailed Resolutions of the CA are in the nature of a final order as they disposed of
the petition completely. It is settled that in cases where an assailed judgment or order is considered
final, the remedy of the aggrieved party is appeal. Hence, in the instant case, petitioner should have
filed a petition for review on certiorari under Rule 45, which is a continuation of the appellate process
over the original case.15

Petitioners should be reminded of the equally-settled rule that a special civil action for certiorari
under Rule 65 is an original or independent action based on grave abuse of discretion amounting to
lack or excess of jurisdiction and it will lie only if there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law.  As such, it cannot be a substitute for a lost appeal.
16 17

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in the interest of
substantial justice, this Court has, before, treated a petition for certiorari as a petition for review on
certiorari, particularly (1) if the petition for certiorari was filed within the reglementary period within
which to file a petition for review on certiorari; (2) when errors of judgment are averred; and (3) when
there is sufficient reason to justify the relaxation of the rules.  Considering that the present petition
18

was filed within the 15-day reglementary period for filing a petition for review on certiorari under Rule
45, that an error of judgment is averred, and because of the significance of the issue on jurisdiction,
the Court deems it proper and justified to relax the rules and, thus, treat the instant petition for
certiorari as a petition for review on certiorari.

Having disposed of the procedural aspect, we now turn to the central issue in this case. The basic
question posed before this Court is whether or not the CTA has jurisdiction over a special civil action
for certiorari assailing an interlocutory order issued by the RTC in a local tax case.

This Court rules in the affirmative.

On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the CTA and giving
to the said court jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under the National Internal Revenue Code or other law or
part of law administered by the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges; seizure, detention or release of property affected fines,
forfeitures or other penalties imposed in relation thereto; or other matters arising under the
Customs Law or other law or part of law administered by the Bureau of Customs; and

(3) Decisions of provincial or City Boards of Assessment Appeals in cases involving the
assessment and taxation of real property or other matters arising under the Assessment
Law, including rules and regulations relative thereto.

On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282) amending RA
1125 by expanding the jurisdiction of the CTA, enlarging its membership and elevating its rank to the
level of a collegiate court with special jurisdiction. Pertinent portions of the amendatory act provides
thus:

Sec. 7. Jurisdiction. - The CTA shall exercise:

338 | P a g e
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges, seizure, detention or release of property affected, fines,
forfeitures or other penalties in relation thereto, or other matters arising under the Customs
Law or other laws administered by the Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs which are adverse to the
Government under Section 2315 of the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product,
commodity or article, involving dumping and countervailing duties under Section 301 and
302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic
Act No. 8800, where either party may appeal the decision to impose or not to impose said
duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the
National Internal Revenue Code or Tariff and Customs Code and other laws administered by
the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses
or felonies mentioned in this paragraph where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos (₱1,000,000.00)
or where there is no specified amount claimed shall be tried by the regular Courts and the
jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the
contrary notwithstanding, the criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted
with, and jointly determined in the same proceeding by the CTA, the filing of the criminal
action being deemed to necessarily carry with it the filing of the civil action, and no right to
reserve the filing of such civil action separately from the criminal action will be recognized.

339 | P a g e
 2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provides, however, that collection cases
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
less than One million pesos (₱1,000,000.00) shall be tried by the proper Municipal Trial
Court, Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
collection cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
Exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction. 19

A perusal of the above provisions would show that, while it is clearly stated that the CTA has
exclusive appellate jurisdiction over decisions, orders or resolutions of the RTCs in local tax cases
originally decided or resolved by them in the exercise of their original or appellate jurisdiction, there
is no categorical statement under RA 1125 as well as the amendatory RA 9282, which provides that
th e CTA has jurisdiction over petitions for certiorari assailing interlocutory orders issued by the RTC
in local tax cases filed before it.

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied
from the mere existence of appellate jurisdiction.  Thus, in the cases of Pimentel v.
20

COMELEC,  Garcia v. De Jesus,  Veloria v. COMELEC,  Department of Agrarian Reform

21 22 23

Adjudication Board v. Lubrica,  and Garcia v. Sandiganbayan,  this Court has ruled against the
24 25

jurisdiction of courts or tribunals over petitions for certiorari on the ground that there is no law which
expressly gives these tribunals such power.  It must be observed, however, that with the exception
26

of Garcia v. Sandiganbayan,  these rulings pertain not to regular courts but to tribunals exercising
27

quasi-judicial powers. With respect to the Sandiganbayan, Republic Act No. 8249  now provides that
28

the special criminal court has exclusive original jurisdiction over petitions for the issuance of the writs
of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and
processes in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme
Court, in the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and
mandamus. With respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP
129) gives the appellate court, also in the exercise of its original jurisdiction, the power to issue,
among others, a writ of certiorari,whether or not in aid of its appellate jurisdiction. As to Regional

340 | P a g e
Trial Courts, the power to issue a writ of certiorari, in the exercise of their original jurisdiction, is
provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the
CTA, Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall
be vested in one Supreme Court and in such lower courts as may be established by law and that
judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of
the CTA includes that of determining whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA,
by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have
the authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also
such power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There
is no perceivable reason why the transfer should only be considered as partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason
& Co., Inc. v. Jaramillo, et al.  that "if a case may be appealed to a particular court or judicial tribunal
29

or body, then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction."  This principle was affirmed in De Jesus v. Court of
30

Appeals,  where the Court stated that "a court may issue a writ of certiorari in aid of its appellate
31

jurisdiction if said court has jurisdiction to review, by appeal or writ of error, the final orders or
decisions of the lower court."  The rulings in J.M. Tuason and De Jesus were reiterated in the more
32

recent cases of Galang, Jr. v. Geronimo  and Bulilis v. Nuez.

33 34

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law,
jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes and other means
necessary to carry it into effect may be employed by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies
with the CA, this Court would be confirming the exercise by two judicial bodies, the CA and the CTA,
of jurisdiction over basically the same subject matter – precisely the split-jurisdiction situation which
is anathema to the orderly administration of justice.  The Court cannot accept that such was the
35

legislative motive, especially considering that the law expressly confers on the CTA, the tribunal with
the specialized competence over tax and tariff matters, the role of judicial review over local tax cases
without mention of any other court that may exercise such power. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private respondents' complaint for tax refund is
vested in the CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To rule otherwise would lead to
an absurd situation where one court decides an appeal in the main case while another court rules on
an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case
filed with the RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against

341 | P a g e
interlocutory orders of the RTC but giving to the CTA the jurisdiction over the appeal from the
decision of the trial court in the same case. It is more in consonance with logic and legal soundness
to conclude that the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by
the RTC carries with it the power to issue a writ of certiorari when necessary in aid of such appellate
jurisdiction. The supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its
appellate jurisdiction should co-exist with, and be a complement to, its appellate jurisdiction to
review, by appeal, the final orders and decisions of the RTC, in order to have complete supervision
over the acts of the latter. 36

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it
effectively, to make all orders that will preserve the subject of the action, and to give effect to the
final determination of the appeal. It carries with it the power to protect that jurisdiction and to make
the decisions of the court thereunder effective. The court, in aid of its appellate jurisdiction, has
authority to control all auxiliary and incidental matters necessary to the efficient and proper exercise
of that jurisdiction.  For this purpose, it may, when necessary, prohibit or restrain the performance of
1âwphi1

any act which might interfere with the proper exercise of its rightful jurisdiction in cases pending
before it.
37

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction
should have powers which are necessary to enable it to act effectively within such jurisdiction. These
should be regarded as powers which are inherent in its jurisdiction and the court must possess them
in order to enforce its rules of practice and to suppress any abuses of its process and to defeat any
attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and
shall possess all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general
grant of jurisdiction, in addition to those expressly conferred on them. These inherent powers are
such powers as are necessary for the ordinary and efficient exercise of jurisdiction; or are essential
to the existence, dignity and functions of the courts, as well as to the due administration of justice; or
are directly appropriate, convenient and suitable to the execution of their granted powers; and
include the power to maintain the court's jurisdiction and render it effective in behalf of the litigants. 38

Thus, this Court has held that "while a court may be expressly granted the incidental powers
necessary to effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation,
implies the necessary and usual incidental powers essential to effectuate it, and, subject to existing
laws and constitutional provisions, every regularly constituted court has power to do all things that
are reasonably necessary for the administration of justice within the scope of its jurisdiction and for
the enforcement of its judgments and mandates."  Hence, demands, matters or questions ancillary
39

or incidental to, or growing out of, the main action, and coming within the above principles, may be
taken cognizance of by the court and determined, since such jurisdiction is in aid of its authority over
the principal matter, even though the court may thus be called on to consider and decide matters
which, as original causes of action, would not be within its cognizance. 40

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to
take cognizance of petitions for certiorari questioning interlocutory orders issued by the RTC in a
local tax case is included in the powers granted by the Constitution as well as inherent in the
exercise of its appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as quasi-
judicial tribunals are concerned, the authority to issue writs of certiorari must still be expressly

342 | P a g e
conferred by the Constitution or by law and cannot be implied from the mere existence of their
appellate jurisdiction. This doctrine remains as it applies only to quasi-judicial bodies.

WHEREFORE, the petition is DENIED.

SO ORDERED.

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 EN BANC

G.R. No. 188056               January 8, 2013

SPOUSES AUGUSTO G. DACUDAO AND OFELIA R. DACUDAO, Petitioners,

vs.
SECRETARY OF JUSTICE RAUL M. GONZALES OF THE DEPARTMENT OF
JUSTICE, Respondent.

DECISION

BERSAMIN, J.:

Petitioners - residents of Bacaca Road, Davao City - were among the investors whom Celso G.
Delos Angeles, Jr. and his associates in the Legacy Group of Companies (Legacy Group) allegedly
defrauded through the Legacy Group's "buy back agreement" that earned them check payments that
were dishonored. After their written demands for the return of their investments went unheeded, they
initiated a number of charges for syndicated estafa against Delos Angeles, Jr., et al. in the Office of
the City Prosecutor of Davao City on February 6, 2009. Three of the cases were docketed as NPS
Docket No. XI-02-INV.-09-A-00356, Docket No. XI-02-INV.-09-C-00752, and Docket No. XI-02-INV.-
09-C-00753.1

On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order No. 182 (DO
No. 182), directing all Regional State Prosecutors, Provincial Prosecutors, and City Prosecutors to
forward all cases already filed against Delos Angeles, Jr., et al. to the Secretariat of the DOJ Special
Panel in Manila for appropriate action.

DO No. 182 reads:2

All cases against Celso G. delos Angeles, Jr., et al. under Legacy Group of Companies, may be filed
with the docket section of the National Prosecution Service, Department of Justice, Padre Faura,
Manila and shall be forwarded to the Secretariat of the Special Panel for assignment and distribution
to panel members, per Department Order No. 84 dated February 13, 2009.

However, cases already filed against Celso G. delos Angeles, Jr. et al. of Legacy group of
Companies in your respective offices with the exemption of the cases filed in Cagayan de Oro City
which is covered by Memorandum dated March 2, 2009, should be forwarded to the Secretariat of
the Special Panel at Room 149, Department of Justice, Padre Faura, Manila, for proper disposition.

For information and guidance.

Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of the City
Prosecutor of Davao City to the Secretariat of the Special Panel of the DOJ. 3

Aggrieved by such turn of events, petitioners have directly come to the Court via petition for
certiorari, prohibition and mandamus, ascribing to respondent Secretary of Justice grave abuse of
discretion in issuing DO No. 182. They claim that DO No. 182 violated their right to due process,
their right to the equal protection of the laws, and their right to the speedy disposition of cases. They
insist that DO No. 182 was an obstruction of justice and a violation of the rule against enactment of
laws with retroactive effect.

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Petitioners also challenge as unconstitutional the issuance of DOJ Memorandum dated March 2,
2009 exempting from the coverage of DO No. No. 182 all the cases for syndicated estafa already
filed and pending in the Office of the City Prosecutor of Cagayan de Oro City. They aver that DOJ
Memorandum dated March 2, 2009 violated their right to equal protection under the Constitution.

The Office of the Solicitor General (OSG), representing respondent Secretary of Justice, maintains
the validity of DO No. 182 and DOJ Memorandum dated March 2, 2009, and prays that the petition
be dismissed for its utter lack of merit.

Issues

The following issues are now to be resolved, to wit:

1. Did petitioners properly bring their petition for certiorari, prohibition and mandamus directly
to the Court?

2. Did respondent Secretary of Justice commit grave abuse of discretion in issuing DO No.
182?

3. Did DO No. 182 and DOJ Memorandum dated March 2, 2009 violate petitioners’
constitutionally guaranteed rights?

Ruling

The petition for certiorari, prohibition and mandamus, being bereft of substance and merit, is
dismissed.

Firstly, petitioners have unduly disregarded the hierarchy of courts by coming directly to the Court
with their petition for certiorari, prohibition and mandamus without tendering therein any special,
important or compelling reason to justify the direct filing of the petition.

We emphasize that the concurrence of jurisdiction among the Supreme Court, Court of Appeals and
the Regional Trial Courts to issue the writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction did not give petitioners the unrestricted freedom of choice of court
forum.4 An undue disregard of this policy against direct resort to the Court will cause the dismissal of
the recourse. In Bañez, Jr. v. Concepcion, 5 we explained why, to wit:

The Court must enjoin the observance of the policy on the hierarchy of courts, and now affirms that
the policy is not to be ignored without serious consequences. The strictness of the policy is designed
to shield the Court from having to deal with causes that are also well within the competence of the
lower courts, and thus leave time to the Court to deal with the more fundamental and more essential
tasks that the Constitution has assigned to it. The Court may act on petitions for the extraordinary
writs of certiorari, prohibition and mandamus only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy. This was why the Court stressed in
Vergara, Sr. v. Suelto:

x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform
the functions assigned to it by the fundamental charter and immemorial tradition. It cannot and
should not be burdened with the task of dealing with causes in the first instance. Its original
jurisdiction to issue the so-called extraordinary writs should be exercised only where absolutely
necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should

345 | P a g e
generally be exercised relative to actions or proceedings before the Court of Appeals, or before
constitutional or other tribunals, bodies or agencies whose acts for some reason or another are not
controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the
competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the
specific action for the writ’s procurement must be presented. This is and should continue to be the
policy in this regard, a policy that courts and lawyers must strictly observe. (Emphasis supplied)

In People v. Cuaresma, the Court has also amplified the need for strict adherence to the policy of
hierarchy of courts. There, noting "a growing tendency on the part of litigants and lawyers to have
their applications for the so-called extraordinary writs, and sometimes even their appeals, passed
upon and adjudicated directly and immediately by the highest tribunal of the land," the Court has
cautioned lawyers and litigants against taking a direct resort to the highest tribunal, viz:

x x x. This Court’s original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus,
quo warranto, habeas corpus and injunction) is not exclusive. It is shared by this Court with Regional
Trial Courts x x x, which may issue the writ, enforceable in any part of their respective regions. It is
also shared by this Court, and by the Regional Trial Court, with the Court of Appeals x x x, although
prior to the effectivity of Batas Pambansa Bilang 129 on August 14, 1981, the latter's competence to
issue the extraordinary writs was restricted to those "in aid of its appellate jurisdiction." This
concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the
writs an absolute, unrestrained freedom of choice of the court to which application therefor will be
directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for petitions for
the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only
when there are special and important reasons therefor, clearly and specifically set out in the petition.
This is established policy. It is a policy that is necessary to prevent inordinate demands upon the
Court’s time and attention which are better devoted to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction on
the jurisdiction of the Court of Appeals in this regard, supra— resulting from the deletion of the
qualifying phrase, "in aid of its appellate jurisdiction" — was evidently intended precisely to relieve
this Court pro tanto of the burden of dealing with applications for the extraordinary writs which, but
for the expansion of the Appellate Court corresponding jurisdiction, would have had to be filed with
it.
1âwphi1

xxxx

The Court therefore closes this decision with the declaration for the information and evidence of all
concerned, that it will not only continue to enforce the policy, but will require a more strict
observance thereof. (Emphasis supplied)

Accordingly, every litigant must remember that the Court is not the only judicial forum from which to
seek and obtain effective redress of their grievances. As a rule, the Court is a court of last resort, not
a court of the first instance. Hence, every litigant who brings the petitions for the extraordinary writs
of certiorari, prohibition and mandamus should ever be mindful of the policy on the hierarchy of
courts, the observance of which is explicitly defined and enjoined in Section 4 of Rule 65, Rules of
Court, viz:

Section 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is

346 | P a g e
timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from
notice of the denial of the said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in the aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid
of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the
Court of Appeals.

In election cases involving an act or an omission of a municipal or a regional trial court, the petition
shall be filed exclusively with the Commission on Elections, in aid of its appellate jurisdiction. 6

Secondly, even assuming arguendo that petitioners’ direct resort to the Court was permissible, the
petition must still be dismissed.

The writ of certiorari is available only when any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy,
and adequate remedy in the ordinary course of law. 7 "The sole office of the writ of certiorari,"
according to Delos Santos v. Metropolitan Bank and Trust Company: 8

x x x is the correction of errors of jurisdiction, which includes the commission of grave abuse of
discretion amounting to lack of jurisdiction. In this regard, mere abuse of discretion is not enough to
warrant the issuance of the writ. The abuse of discretion must be grave, which means either that the
judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty,
or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such
judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical
manner as to be equivalent to lack of jurisdiction.

For a special civil action for certiorari to prosper, therefore, the following requisites must concur,
namely: (a) it must be directed against a tribunal, board or officer exercising judicial or quasi-judicial
functions; (b) the tribunal, board, or officer must have acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and (c) there is no appeal
nor any plain, speedy, and adequate remedy in the ordinary course of law. 9 The burden of proof lies
on petitioners to demonstrate that the assailed order was issued without or in excess of jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction.

Yet, petitioners have not shown a compliance with the requisites. To start with, they merely alleged
that the Secretary of Justice had acted without or in excess of his jurisdiction. Also, the petition did
not show that the Secretary of Justice was an officer exercising judicial or quasi-judicial functions.
Instead, the Secretary of Justice would appear to be not exercising any judicial or quasi-judicial
functions because his questioned issuances were ostensibly intended to ensure his subordinates’
efficiency and economy in the conduct of the preliminary investigation of all the cases involving the
Legacy Group. The function involved was purely executive or administrative.

The fact that the DOJ is the primary prosecution arm of the Government does not make it a quasi-
judicial office or agency. Its preliminary investigation of cases is not a quasi-judicial proceeding. Nor
does the DOJ exercise a quasi-judicial function when it reviews the findings of a public prosecutor on

347 | P a g e
the finding of probable cause in any case. Indeed, in Bautista v. Court of Appeals, 10 the Supreme
Court has held that a preliminary investigation is not a quasi-judicial proceeding, stating:

x x x the prosecutor in a preliminary investigation does not determine the guilt or innocence of the
accused. He does not exercise adjudication nor rule-making functions. Preliminary investigation is
merely inquisitorial, and is often the only means of discovering the persons who may be reasonably
charged with a crime and to enable the fiscal to prepare his complaint or information. It is not a trial
of the case on the merits and has no purpose except that of determining whether a crime has been
committed and whether there is probable cause to believe that the accused is guilty thereof. While
the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the
courts, ultimately, that pass judgment on the accused, not the fiscal. 11

There may be some decisions of the Court that have characterized the public prosecutor’s power to
conduct a preliminary investigation as quasi-judicial in nature. Still, this characterization is true only
to the extent that the public prosecutor, like a quasi-judicial body, is an officer of the executive
department exercising powers akin to those of a court of law.

But the limited similarity between the public prosecutor and a quasi-judicial body quickly endsthere.
For sure, a quasi-judicial body is an organ of government other than a court of law or a legislative
office that affects the rights of private parties through either adjudication or rule-making; it performs
adjudicatory functions, and its awards and adjudications determine the rights of the parties coming
before it; its decisions have the same effect as the judgments of a court of law. In contrast, that is not
the effect whenever a public prosecutor conducts a preliminary investigation to determine probable
cause in order to file a criminal information against a person properly charged with the offense, or
whenever the Secretary of Justice reviews the public prosecutor’s orders or resolutions.

Petitioners have self-styled their petition to be also for prohibition. However, we do not see how that
can be. They have not shown in their petition in what manner and at what point the Secretary of
Justice, in handing out the assailed issuances, acted without or in excess of his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction. On the other hand, we already
indicated why the issuances were not infirmed by any defect of jurisdiction. Hence, the blatant
omissions of the petition transgressed Section 2, Rule 65 of the Rules of Court, to wit:

Section 2. Petition for prohibition. — When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.

The petition shall likewise be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and
a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.
(2a) Similarly, the petition could not be one for mandamus, which is a remedy available only when
"any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act
which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully
excludes another from the use and enjoyment of a right or office to which such other is entitled, and
there is no other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court." 12 The main objective of mandamus
is to compel the performance of a ministerial duty on the part of the respondent. Plainly enough, the

348 | P a g e
writ of mandamus does not issue to control or review the exercise of discretion or to compel a
course of conduct,13 which, it quickly seems to us, was what petitioners would have the Secretary of
Justice do in their favor. Consequently, their petition has not indicated how and where the Secretary
of Justice’s assailed issuances excluded them from the use and enjoyment of a right or office to
which they were unquestionably entitled.

Thirdly, there is no question that DO No. 182 enjoyed a strong presumption of its validity. In
ABAKADA Guro Party List v. Purisima,14 the Court has extended the presumption of validity to
legislative issuances as well as to rules and regulations issued by administrative agencies, saying:

Administrative regulations enacted by administrative agencies to implement and interpret the law
which they are entrusted to enforce have the force of law and are entitled to respect. Such rules and
regulations partake of the nature of a statute and are just as binding as if they have been written in
the statute itself. As such, they have the force and effect of law and enjoy the presumption of
constitutionality and legality until they are set aside with finality in an appropriate case by a
competent court.15

DO No. 182 was issued pursuant to Department Order No. 84 that the Secretary of Justice had
promulgated to govern the performance of the mandate of the DOJ to "administer the criminal justice
system in accordance with the accepted processes thereof" 16 as expressed in Republic Act No.
10071 (Prosecution Service Act of 2010) and Section 3, Chapter I, Title III and Section 1, Chapter I,
Title III of Book IV of Executive Order 292 (Administrative Code of 1987).

To overcome this strong presumption of validity of the questioned issuances, it became incumbent
upon petitioners to prove their unconstitutionality and invalidity, either by showing that the
Administrative Code of 1987 did not authorize the Secretary of Justice to issue DO No. 182, or by
demonstrating that DO No. 182 exceeded the bounds of the Administrative Code of 1987 and other
pertinent laws. They did not do so. They must further show that the performance of the DOJ’s
functions under the Administrative Code of 1987 and other pertinent laws did not call for the
impositions laid down by the assailed issuances. That was not true here, for DO No 182 did not
deprive petitioners in any degree of their right to seek redress for the alleged wrong done against
them by the Legacy Group. Instead, the issuances were designed to assist petitioners and others
like them expedite the prosecution, if warranted under the law, of all those responsible for the wrong
through the creation of the special panel of state prosecutors and prosecution attorneys in order to
conduct a nationwide and comprehensive preliminary investigation and prosecution of the cases.
Thereby, the Secretary of Justice did not act arbitrarily or oppressively against petitioners.

Fourthly, petitioners attack the exemption from the consolidation decreed in DO No. 182 of the cases
filed or pending in the Office of the City Prosecutor of Cagayan de Oro City, claiming that the
exemption traversed the constitutional guaranty in their favor of the equal protection of law. 17

The exemption is covered by the assailed DOJ Memorandum dated March 2, 2009, to wit:

It has come to the attention of the undersigned that cases for syndicated estafa were filed with your
office against officers of the Legacy Group of Companies. Considering the distance of the place of
complainants therein to Manila, your Office is hereby exempted from the directive previously issued
by the undersigned requiring prosecution offices to forward the records of all cases involving Legacy
Group of Companies to the Task Force.

Anent the foregoing, you are hereby directed to conduct preliminary investigation of all cases
involving the Legacy Group of Companies filed in your office with dispatch and to file the
corresponding informations if evidence warrants and to prosecute the same in court.

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Petitioners’ attack deserves no consideration. The equal protection clause of the Constitution does
not require the universal application of the laws to all persons or things without distinction; what it
requires is simply equality among equals as determined according to a valid classification. 18 Hence,
the Court has affirmed that if a law neither burdens a fundamental right nor targets a suspect class,
the classification stands as long as it bears a rational relationship to some legitimate government
end.19

That is the situation here. In issuing the assailed DOJ Memorandum dated March 2, 2009, the
Secretary of Justice took into account the relative distance between Cagayan de Oro, where many
complainants against the Legacy Group resided, and Manila, where the preliminary investigations
would be conducted by the special panel. He also took into account that the cases had already been
filed in the City Prosecutor’s Office of Cagayan de Oro at the time he issued DO No. 182. Given the
considerable number of complainants residing in Cagayan de Oro City, the Secretary of Justice was
fully justified in excluding the cases commenced in Cagayan de Oro from the ambit of DO No. 182.
The classification taken into consideration by the Secretary of Justice was really valid. Resultantly,
petitioners could not inquire into the wisdom behind the exemption upon the ground that the non-
application of the exemption to them would cause them some inconvenience.

Fifthly, petitioners contend that DO No. 182 violated their right to the speedy disposition of cases
guaranteed by the Constitution. They posit that there would be considerable delay in the resolution
of their cases that would definitely be "a flagrant transgression of petitioners’ constitutional rights to
speedy disposition of their cases."20

We cannot favor their contention.

In The Ombudsman v. Jurado,21 the Court has clarified that although the Constitution guarantees the
right to the speedy disposition of cases, such speedy disposition is a flexible concept. To properly
define that concept, the facts and circumstances surrounding each case must be evaluated and
taken into account. There occurs a violation of the right to a speedy disposition of a case only when
the proceedings are attended by vexatious, capricious, and oppressive delays, or when unjustified
postponements of the trial are sought and secured, or when, without cause or justifiable motive, a
long period of time is allowed to elapse without the party having his case tried. 22 It is cogent to
mention that a mere mathematical reckoning of the time involved is not determinant of the concept. 23

The consolidation of the cases against Delos Angeles, Jr., et al. was ordered obviously to obtain
expeditious justice for the parties with the least cost and vexation to them. Inasmuch as the cases
filed involved similar or related questions to be dealt with during the preliminary investigation, the
Secretary of Justice rightly found the consolidation of the cases to be the most feasible means of
promoting the efficient use of public resources and of having a comprehensive investigation of the
cases.

On the other hand, we do not ignore the possibility that there would be more cases reaching the
DOJ in addition to those already brought by petitioners and other parties. Yet, any delays in
petitioners’ cases occasioned by such other and subsequent cases should not warrant the
invalidation of DO No. 182. The Constitution prohibits only the delays that are unreasonable,
arbitrary and oppressive, and tend to render rights nugatory. 24 In fine, we see neither undue delays,
nor any violation of the right of petitioners to the speedy disposition of their cases.

Sixthly, petitioners assert that the assailed issuances should cover only future cases against Delos
Angeles, Jr., et al., not those already being investigated. They maintain that DO No. 182 was issued
in violation of the prohibition against passing laws with retroactive effect.

350 | P a g e
Petitioners’ assertion is baseless.

As a general rule, laws shall have no retroactive effect. However, exceptions exist, and one such
exception concerns a law that is procedural in nature. The reason is that a remedial statute or a
statute relating to remedies or modes of procedure does not create new rights or take away vested
rights but only operates in furtherance of the remedy or the confirmation of already existing
rights.25 A statute or rule regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of its passage. All procedural laws are retroactive in
that sense and to that extent. The retroactive application is not violative of any right of a person who
may feel adversely affected, for, verily, no vested right generally attaches to or arises from
procedural laws.

Finally, petitioners have averred but failed to establish that DO No. 182 constituted obstruction of
justice. This ground of the petition, being unsubstantiated, was unfounded.

Nonetheless, it is not amiss to reiterate that the authority of the Secretary of Justice to assume
jurisdiction over matters involving the investigation of crimes and the prosecution of offenders is fully
sanctioned by law. Towards that end, the Secretary of Justice exercises control and supervision over
all the regional, provincial, and city prosecutors of the country; has broad discretion in the discharge
of the DOJ’s functions; and administers the DOJ and its adjunct offices and agencies by
promulgating rules and regulations to carry out their objectives, policies and functions.

Consequently, unless and until the Secretary of Justice acts beyond the bounds of his authority, or
arbitrarily, or whimsically, or oppressively, any person or entity who may feel to be thereby aggrieved
or adversely affected should have no right to call for the invalidation or nullification of the rules and
regulations issued by, as well as other actions taken by the Secretary of Justice.

WHEREFORE, the Court DISMISSES the omnibus petition for certiorari, prohibition, and mandamus
for lack of merit.

Petitioners shall pay the costs of suit.

SO ORDERED.

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 THIRD DIVISION

G.R. No. 200670, July 06, 2015

CLARK INVESTORS AND LOCATORS ASSOCIATION,

INC., Petitioner, v. SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL
REVENUE, Respondents.

DECISION

VILLARAMA, JR.,  J.:

This is a petition for  certiorari with a prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction to annul and set aside Revenue Regulations
No. 2-2012 (RR 2-2012) issued by the Department of Finance (DOF) on February 17,
2012 upon recommendation of the Bureau of Internal Revenue (BIR). Petitioner Clark
Investors and Locators Association, Inc. claims that RR 2-2012, which imposes Value
Added Tax (VAT) and excise tax on the importation of petroleum and petroleum
products from abroad into the Freeport or Economic Zones, is void and contrary to
Republic Act (RA) No. 7227, otherwise known as the Bases Conversion and
Development Act of 1992, as amended by RA No. 9400. The salient facts follow. On
March 13, 1992, Congress enacted RA No. 7227 which mandated the accelerated
conversion of the Clark and Subic military reservations into special economic zones.
Section 12 thereof provides for the creation of the Subic Special Economic Zone:
SEC. 12. Subic Special Economic Zone. — Subject to the concurrence by resolution of
the sangguniang panlungsod of the City of Olongapo and the sangguniang bayan of the
Municipalities of Subic, Morong and Hermosa, there is hereby created a Special
Economic and Free-port Zone consisting of the City of Olongapo and the Municipality of
Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its
contiguous extensions as embraced, covered, and defined by the 1947 Military Bases
Agreement between the Philippines and the United States of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong and Hermosa, Province
of Bataan, hereinafter referred to as the Subic Special Economic Zone whose metes and
bounds shall be delineated in a proclamation to be issued by the President of the
Philippines. Within thirty (30) days after the approval of this Act, each local government
unit shall submit its resolution of concurrence to join the Subic Special Economic Zone
to the Office of the President. Thereafter, the President of the Philippines shall issue a
proclamation defining the metes and bounds of the zone as provided herein. The
abovementioned zone shall be subject to the following policies: (a)
Within the framework and subject to the mandate and limitations of the Constitution
and the pertinent provisions of the Local Government Code, the Subic Special Economic
Zone shall be developed into a self-sustaining, industrial, commercial, financial and
investment center to generate employment opportunities in and around the zone and to
attract and promote productive foreign investments; (b) The Subic Special Economic
Zone shall be operated and managed as a separate customs territory
ensuring free flow or movement of goods and capital within, into and exported
out of the Subic Special Economic Zone, as well as provide incentives such as
tax and duty-free importations of raw materials, capital and
equipment. However, exportation or removal of goods from the territory of the

352 | P a g e
Subic Special Economic Zone to the other parts of the Philippine territory shall
be subject to customs duties and taxes under the Customs and Tariff Code and
other relevant tax laws of the Philippines; (c) The provision of existing laws,
rules and regulations to the contrary notwithstanding, no taxes, local and
national, shall be imposed within the Subic Special Economic Zone. In lieu of
paying taxes, three percent (3%) of the gross income earned by all businesses
and enterprises within the Subic Special Economic Zone shall be remitted to
the National Government, one percent (1%) each to the local government
units affected by the declaration of the zone in proportion to their population
area, and other factors. In addition, there is hereby established a development
fund of one percent (1%) of the gross income earned by all businesses and
enterprises within the Subic Special Economic Zone to be utilized for the
development of municipalities outside the City of Olongapo and the
Municipality of Subic, and other municipalities contiguous to the base areas. In
case of conflict between national and local laws with respect to tax exemption
privileges in the Subic Special Economic Zone, the same shall be resolved in
favor of the latter; (d) No exchange control policy shall be applied and free markets
for foreign exchange, gold, securities and futures shall be allowed and maintained in
the Subic Special Economic Zone; (e) The Central Bank, through the Monetary Board,
shall supervise and regulate the operation of banks and other financial institutions
within the Subic Special Economic Zone; (f) Banking and finance shall be liberalized
with the establishment of foreign currency depository units of local commercial banks
and offshore banking units of foreign banks with minimum Central Bank regulation; (g)
Any investor within the Subic Special Economic Zone whose continuing investment shall
not be less than Two hundred fifty thousand dollars ($250,000), his/her spouse and
dependent children under twenty-one (21) years of age, shall be granted permanent
resident status within the Subic Special Economic Zone. They shall have freedom of
ingress and egress to and from the Subic Special Economic Zone without any need of
special authorization from the Bureau of Immigration and Deportation. The Subic Bay
Metropolitan Authority referred to in Section 13 of this Act may also issue working visas
renewable every two (2) years to foreign executives and other aliens possessing highly-
technical skills which no Filipino within the Subic Special Economic Zone possesses, as
certified by the Department of Labor and Employment. The names of aliens granted
permanent residence status and working visas by the Subic Bay Metropolitan Authority
shall be reported to the Bureau of Immigration and Deportation within thirty (30) days
after issuance thereof; (h) The defense of the zone and the security of its perimeters
shall be the responsibility of the National Government in coordination with the Subic
Bay Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide and
establish its own internal security and firefighting forces; and (i) Except as herein
provided, the local government units comprising the Subic Special Economic Zone shall
retain their basic autonomy and identity. The cities shall be governed by their
respective charters and the municipalities shall operate and function in accordance with
Republic Act No. 7160, otherwise known as the Local Government Code of 1991.
(Emphasis supplied)
Based on Section 12 (c) above, in lieu of national and local taxes, all businesses and
enterprises operating within the Subic Special Economic Zone shall pay a preferential
gross income tax rate of five percent (5%). In addition, Section 12 (b) also provides
that such businesses and enterprises shall be exempt from the payment of all taxes and
duties on the importation of raw materials, capital, and equipment into the Subic
Special Economic Zone. Meanwhile, on March 20, 2007, Congress enacted RA No. 9400

353 | P a g e
which extended the aforementioned tax and fiscal incentives under RA No. 7227 to the
Clark Freeport Zone. By way of amendment, Section 2 thereof provides:
SEC. 2. Section 15 of Republic Act No. 7227, as amended, is hereby amended to read
as follows:
"SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). -
Subject to the concurrence by resolution of the local government units directly affected,
the President is hereby authorized to create by executive proclamation a Special
Economic Zone covering the lands occupied by the Clark military reservations and its
contiguous extensions as embraced, covered and defined by the 1947 Military Bases
Agreement between the Philippines and the United States of America, as amended,
located within the territorial jurisdiction of Angeles City, municipalities of Mabalacat and
Porac, Province of Pampanga, and the municipalities of Capas and Bamban, Province of
Tarlac, in accordance with the provision as herein provided insofar as applied to the
Clark military reservations. The Clark Air Base proper with an area of not more than
four thousand four hundred hectares (4,400 has.), with the exception of the twenty-
two-hectare commercial area situated near the main gate and the Bayanihan Park
consisting of seven and a half hectares (7.5 has.) located outside the main gate of the
Clark Special Economic Zone, is hereby declared a freeport zone. "The CFZ shall be
operated and managed as a separate customs territory ensuring free flow or
movement of goods and capital equipment within, into and exported out of the
CFZ, as well as provide incentives such as tax and duty-free importation of raw
materials and capital equipment. However, exportation or removal of goods
from the territory of the CFZ to the other parts of the Philippine territory shall
be subject to customs duties and taxes under the Tariff and Customs Code of
the Philippines, as amended, the National Internal Revenue Code of 1997, as
amended, and other relevant tax laws of the Philippines. "The provisions of
existing laws, rules and regulations to the contrary notwithstanding, no national and
local taxes shall be imposed on registered business enterprises within the CFZ. In lieu
of said taxes, a five percent (5%) tax on gross income earned shall be paid by all
registered business enterprises within the CFZ and shall be directly remitted as follows:
three percent (3%) to the National Government, and two percent (2%) to the
treasurer's office of the municipality or city where they are located. "The governing
body of the Clark Special Economic Zone shall likewise be established by executive
proclamation with such powers and functions exercised by the Export Processing Zone
Authority pursuant to Presidential Decree No. 66, as amended: Provided, That it shall
have no regulatory authority over public utilities, which authority pertains to the
regulatory agencies created by law for the purpose, such as the Energy Regulatory
Commission created under Republic Act No. 9136 and the National Telecommunications
Commission created under Republic Act No. 7925. "xxx "Subject to the concurrence by
resolution of the local government units directly affected and upon recommendation of
the Philippine Economic Zone Authority (PEZA), the President is hereby authorized to
create by executive proclamation Special Economic Zones covering the City of Balanga
and the municipalities of Limay, Mariveles, Morong, Hermosa, and Dinalupihan,
Province of Bataan. "Subject to the concurrence by resolution of the local government
units directly affected and upon recommendation of the PEZA, the President is hereby
authorized to create by executive proclamation Special Economic Zones covering the
municipalities of Castillejos, San Marcelino, and San Antonio, Province of Zambales.
"Duly registered business enterprises that will operate in the Special Economic Zones to
be created shall be entitled to the same tax and duty incentives as provided for under
Republic Act No. 7916, as amended: Provided, That for the purpose of administering

354 | P a g e
these incentives, the PEZA shall register, regulate, and supervise all registered
enterprises within the Special Economic Zones."
Thus, the businesses and enterprises within the Clark Freeport Zone are similarly
exempt from the payment of all taxes and duties on the importation of raw materials,
capital and equipment. On February 17, 2012, the DOF, upon recommendation of the
BIR, issued RR 2-2012 which imposed VAT and excise tax on the importation of
petroleum and petroleum products from abroad and into the Freeport or Economic
Zones. Section 3 thereof partly provides:
SECTION 3. TAX TREATMENT OF ALL PETROLEUM AND PETROLEUM PRODUCTS
IMPORTED AND ITS SUBSEQUENT EXPORTATION OR SALES TO FREEPORT AND
ECONOMIC ZONE LOCATORS OR OTHER PERSONS/ENTITIES; REFUND OF
TAXES PAID; AUTHORITY TO RELEASE IMPORTED GOODS (ATRIG) AND OTHER
ADMINISTRATIVE REQUIREMENTS. — The Value-Added and Excise taxes which are
due on all petroleum and petroleum products that are imported and/or brought directly
from abroad to the Philippines, including Freeport and Economic zones, shall be paid by
the importer thereof to the Bureau of Customs (BOC). The subsequent exportation or
sale/delivery of these petroleum or petroleum products to registered enterprises
enjoying tax privileges within the Freeport and Economic zones, as well as the sale of
said goods to persons engaged in international shipping or international air transport
operations, shall be subject to 0% VAT. With respect to the VAT paid on petroleum or
petroleum products by the importer on account of aforesaid 0% VAT
transactions/entities and the Excise taxes paid on account of sales to international
carriers of Philippine or Foreign Registry for use or consumption outside the Philippines
or exempt entities or agencies covered by tax treaties, conventions and international
agreements for their use or consumption (covered by Certification in such entity's
favor), as well as entities which are by law exempt from indirect taxes, the importer
may file a claim for credit or refund with the BOC, which shall process the claim for
refund, subject to the favorable endorsement of the BIR, in accordance with existing
rules and procedures: Provided, that no claim for refund shall be granted unless it is
properly shown to the satisfaction of the BIR that said petroleum or petroleum products
have been sold to a duly registered locator and have been utilized in the registered
activity/operation of the locator, or that such have been sold and have been used for
international shipping or air transport operations, or that the entities to which the said
goods were sold are statutorily zero-rated for VAT, and/or exempt from Excise taxes. x
xxx
On March 8, 2012, petitioner, which represents the businesses and enterprises within
the Clark Freeport Zone, filed the instant petition alleging that respondents acted with
grave abuse of discretion in issuing RR 2-2012. It argues that by imposing the VAT and
excise tax on the importation of petroleum and petroleum products from abroad and
into the Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax exemption
granted by RA No. 7227 and RA No. 9400 to the businesses and enterprises operating
within the Subic Special Economic Zone and Clark Freeport Zone. Respondents, through
the Office of the Solicitor General (OSG), contend that the petition must be denied
outright because the special civil action for certiorari cannot be used to assail RR 2-
2012 which was issued by the respondents in the exercise of their quasi-legislative or
rule-making powers. According to the OSG, certiorari can only be used against a public
officer exercising judicial or quasi-judicial powers. In addition, the OSG invokes the
doctrine of hierarchy of courts and claims that a petition for certiorari cannot be filed
directly to this Court absent highly exceptional reasons which the petitioner failed to
adduce. Finally, the OSG opposes the argument of petitioner that RR 2-2012

355 | P a g e
unilaterally revoked the tax exemption granted by RA No. 7227 and RA No. 9400 to the
businesses and enterprises operating within the Subic Special Economic Zone and Clark
Freeport Zone by referring to the tax refund under Section 3 of RR 2-2012. It points out
that Section 3 allows the businesses and enterprises operating within the Subic Special
Economic Zone and Clark Freeport Zone to claim for a tax refund upon submission of
competent proof that they used the imported fuel exclusively within the Subic Special
Economic Zone and Clark Freeport Zone. Thus, the OSG claimed that RR 2-2012 is
consistent with RA No. 7227 and RA No. 9400. We deny the petition for being an
improper remedy. Firstly, respondents did not act in any judicial or quasi-judicial
capacity. A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as
amended, is a special civil action that may be invoked only against a tribunal, board, or
officer exercising judicial or quasi-judicial functions. Section 1, Rule 65 of the 1997
Rules of Civil Procedure, as amended, provides:
SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require. x x x x
For a special civil action for certiorari to prosper, the following requisites must concur:
(1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-
judicial functions; (2) the tribunal, board, or officer must have acted without or in
excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in
the ordinary course of law.1 A respondent is said to be exercising judicial function where
he has the power to determine what the law is and what the legal rights of the parties
are, and then undertakes to determine these questions and adjudicate upon the rights
of the parties.2 Quasi-judicial function, on the other hand, is "a term which applies to
the action, discretion, etc., of public administrative officers or bodies x x x required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature."3 Before a tribunal, board, or officer may exercise judicial or quasi-
judicial acts, it is necessary that there be a law that gives rise to some specific rights of
persons or property under which adverse claims to such rights are made, and the
controversy ensuing therefrom is brought before a tribunal, board, or officer clothed
with power and authority to determine the law and adjudicate the respective rights of
the contending parties.4 Respondents do not fall within the ambit of a tribunal, board,
or officer exercising judicial or quasi-judicial functions. They issued RR 2-2012 in the
exercise of their quasi-legislative or rule-making powers, and not judicial or quasi-
judicial functions. Verily, respondents did not adjudicate or determine the rights of the
parties. In order to determine whether a Revenue Regulation is quasi-legislative in
nature, we must examine the legal basis of the Secretary of Finance in the issuance
thereof. In BPI Leasing Corporation v. Court of Appeals,5 we ruled that Revenue
Regulation 19-86 was quasi-legislative in nature because it was issued by the Secretary
of Finance in the exercise of his rule-making powers under Section 244 of the National
Internal Revenue Code (NIRC):
The Court finds the questioned revenue regulation to be legislative in nature. Section 1
of Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section

356 | P a g e
277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the
Secretary of Finance to promulgate all needful rules and regulations for the effective
enforcement of the provisions of the NIRC. In Paper Industries Corporation of the
Philippines v. Court of Appeals, the Court recognized that the application of Section 277
calls for none other than the exercise of quasi-legislative or rule-making authority.
Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the
rule-making power of the Secretary of Finance, thus making it legislative, and not
interpretative as alleged by BLC.6
Similarly, in the case at bar, RR 2-2012 was also issued by the Secretary of Finance
based on Section 244 of the NIRC. Section 1 of RR 2-2012 provides:
SECTION 1. SCOPE — Pursuant to Section 244, in relation to Section 245, of the
National Internal Revenue Code (NIRC) of 1997, as amended, these Regulations are
hereby promulgated in order to prescribe: 1) the tax administration treatment of all
petroleum and petroleum products imported into the Philippines, including those
coming in through Freeport zones or Economic Zones; and 2) the refund of Value-
Added Tax (VAT) and Excise taxes paid for transactions statutorily zero-rated or exempt
therefrom; and to provide administrative guidelines on the operation and maintenance
of storage tanks, facilities, depots or terminals where commodities for commercial use
can be stored.
Relevantly, Section 244 of the NIRC provides:
SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. —
The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate
all needful rules and regulations for the effective enforcement of the provisions of this
Code.
Conformably with our ruling in BPI Leasing Corporation that the application of Section
244 of the NIRC is an exercise of quasi-legislative or rule-making powers of the
Secretary of Finance, and since RR 2-2012 was issued by the Secretary of Finance
based on Section 244 of the NIRC, such administrative issuance is therefore quasi-
legislative in nature which is outside the scope of a petition for certiorari. Secondly,
while this case is styled as a petition for certiorari, there is, however, no denying the
fact that, in essence, it seeks the declaration by this Court of the unconstitutionality
and illegality of the questioned rule, thus partaking the nature, in reality, of one for
declaratory relief over which this Court has only appellate, not original,
jurisdiction.7 Section 5, Article VIII of the 1987 Philippine Constitution provides: Sec. 5.
The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public
ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus. (2) Review, revise, reverse, modify, or affirm on appeal
or certiorari  as the law or the Rules of Court may provide, final judgments and orders
of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question. x x x x
Accordingly, this petition must fail because this Court does not have original jurisdiction
over a petition for declaratory relief even if only questions of law are involved.8 The
special civil action of declaratory relief falls under the exclusive jurisdiction of the
Regional Trial Courts.9 The Rules of Court is explicit that such action shall be brought
before the appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court
provides:

357 | P a g e
SECTION 1. Who may file petition. — Any person interested under a deed, will, contract
or other written instrument, whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine
any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.
Lastly, although this Court, the Court of Appeals and the Regional Trial Courts have
concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum.10 In Heirs ofBertuldo Hinog v. Hon.
Melicor,11 citing People v. Cuaresrna,12 we held:
This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared
by this Court with Regional Trial Courts and with the Court of Appeals. This concurrence
of jurisdiction is not, however, to be taken as according to parties seeking any of the
writs an absolute, unrestrained freedom of choice of the court to which application
therefor will be directed. There is after all a hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard for that
judicial hierarchy most certainly indicates that petitions for the issuance of
extraordinary writs against first level ("inferior") courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition. This is [an] established policy. It is a policy necessary
to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court's docket.
The rationale for this rule is two-fold: (1) it would be an imposition upon the precious
time of this Court; and (2) it would cause an inevitable and resultant delay, intended or
otherwise, in the adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of procedure, or as
better equipped to resolve the issues because this Court is not a trier of facts. We thus
affirm the judicial policy that we shall not entertain a direct resort to this Court unless
the remedy cannot be obtained in the appropriate courts, and exceptional and
compelling circumstances, such as cases of national interest and of serious implications,
justify the availment of the extraordinary remedy of writ of certiorari. In Chamber of
Real Estate and Builders Association, Inc. (CREBA) v. Secretary of Agrarian
Reform,15 we provided examples of such exceptional and compelling circumstances, to
wit:
Exceptional and compelling circumstances were held present in the following cases:
(a) Chavez v. Romulo, on citizens' right to bear anus; (b) Government of [the] United
States of America v. Hon. Purganan, on bail in extradition proceedings; (c) Commission
on Elections v. Judge Quijano-Padilla, on government contract involving modernization
and computerization of voters' registration list; (d) Buklod ng Kawaning EIIB v. Hon.
Sec. Zamora, on status and existence of a public office; and (e) Hon. Fortich v. Hon.
Corona, on the so-called "Win-Win Resolution" of the Office of the President which
modified the approval of the conversion to agro-industrial area.16

358 | P a g e
In the case at bar, petitioner failed to allege such exceptional and compelling
circumstances which justify a direct resort to this Court. In view of the serious
procedural and technical defects of the petition, we see no need for this Court to
resolve the other issues raised by the petitioner.

WHEREFORE, premises considered, the petition is DISMISSED. With costs against the

petitioner.

SO ORDERED.

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 EN BANC

April 5, 2016

G.R. No. 201852

ROBERTO G. ROSALES, NICANOR M. BRIONES, PONCIANO D. PAYUYO, JOSE R. PING-AY,

ISIDRO Q. LICO, AND JOSE TAN RAMIREZ, in their capacity as members of the Board of
Directors of NATIONAL ALLIANCE FOR CONSUMER EMPOWERMENT OF ELECTRIC
COOPERATIVES and on behalf of the nine million (9,000,000) member consumers of NEA-
Electric Cooperatives nationwide who have contributed the Members' Contributions for
Capital Expenditures (MCC) or Reinvestment Fund for Sustainable Capital Expenditures
(RFSC), Petitioners,
vs.
ENERGY REGULATORY COMMISSION (ERC), ASELCO, AKELCO, ALECO, ANTECO,
AURELCO, BATELEC I, BATELEC II, BENECO, BILECO, BOHECO I, BOHECO II, FIBECO,
BUSECO, CAGELCO I, CAGELCO II, CASURECO I, CASURECO II, CASURECO III, CASURECO
IV, CAMELCO, CAPELCO, CEBECO I, CEBECO II, CEBECO III, CENECO, CENPELCO,
DORECO, DASURECO, ESAMELCO, FLECO, GUIMELCO, IFELCO, INEC, ISECO, ILECO I,
ILECO II, ILECO III, ISELCO I, KAELCO, LUELCO, SORECO I, LANECO, LEYECO I/DORELCO,
LEYECO II, LEYECO III, LEYECO IV, LEYECO V, PENELCO, MOELCO I, MOELCO II,
MORESCO I, MORESCO II, MOPRECO, NORECO I, NORSAMELCO, NEECO I, NEECO II - Area
I, NEECO II - Area II, PELCO I, PELCO II, CANORECO, PRESCO, QUEZELCO I, QUEZELCO II,
SAMELCO I, SAMELCO II, SIARELCO, SOCOTECO I, SOCOTECO II, SOLECO, SUKELCO,
SURNECO, SURSECO I, SURSECO II, TARELCO I, TARELCO II, VRESCO, ZAMECO I,
ZAMECO II, ZAMCELCO, ZANECO, ZAMSURECO I, ZAMSURECO II, BAT ANELCO, LUBELCO,
OMECO, ORMECO, MARELCO, TIELCO, ROMELCO, BISELCO, FICELCO, MACELCO,
TISELCO, BANELCO, PROSIELCO, CELCO, COTELCO, TAWELCO, SIASELCO, SULECO,
BASELCO, CASELCO, LASURECO, MAGELCO, DIELCO, and COTELCO-
PALMA, Respondents.

DECISION

PERALTA, J.:

This petition for certiorari under Rule 65 of the Rules of Court (Rules) Members ' Contribution for

Capital Expenditures (MCC), later renamed as Reinvestment Fund for Sustainable Capital
Expenditures (RFSC), which is being imposed by on-grid Electric Cooperatives (ECs ), pursuant to
the following Rules and Resolution of the Energy Regulatory Commission

(ERC):

1. Rules for Setting the Electric Cooperatives’ Wheeling Rates (RSEC-WR), which was
adopted in Resolution No. 20, Series of 2009, issued on September 23, 2009;  and
1

2. Resolution No. 14, Series of 2011, issued on July 6, 2011. 2

In particular, Article 5 of RSEC-WR states:

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 ARTICLE 5
MEMBERS’ CONTRIBUTION FOR CAPITAL EXPENDITURES

5.1 Function of Members’ Contribution for Capital Expenditures

The Members’ Contribution for Capital Expenditures is envisioned to fund the amortization or debt
service of its indebtedness associated with the expansion, rehabilitation or upgrading of the existing
electric power system of the ECs in accordance with their ERC-approved Capital Expenditure Plan.

5.2 Utilization of Members’ Contribution for Capital Expenditures

The utilization of the Member’s Contribution fund shall be subject to the following conditions:

a. It shall be used solely for capital expenditure or any other projects approved by the
Commission and not for any other purpose, even on a temporary basis;

b. The amounts collected for Members’ Contribution fund shall be recognized as contribution
from member-consumers;

c. The amounts collected for Members’ Contribution, including interest income, shall be
placed in a separate account; and

d. If the member-consumer terminates its contract with the EC, the said contribution shall not
be withdrawn, instead the same shall be treated as Contribution in Aid of Construction
(CIAC).

In the case of ECs registered under the CDA, the said member-contribution shall be converted into
member’s share capital.

5.3 Members’ Contribution for Capital Expenditure Rate Cap Per Group

The EC’s current tariff includes a reinvestment fund provision calculated at five percent (5%) of its
unbundled retail rate (inclusive of generation, transmission, and distribution charges) as part of its
Rate Unbundling Decision. This translates to an average of 22% of the 98 ECs’ distribution charges
(inclusive of distribution, supply and metering charges). The Members’ Contribution for Capital
Expenditure Rate Cap was determined by applying the 22% to the respective group’s 2008 median
operating costs per kWh which was the basis for the ECs’ operating revenue requirements.

The result of the afore-mentioned calculation is presented in Table 7 hereunder:

TABLE 7. Members’ Contribution for Capital Expenditure Rate Cap per Group

Member’s contribution for

GROUP 3
2008 level (median) CAPEX @ 22%

A 2.420000 0.5324

B 1.820000 0.4004

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 C 1.680000 0.3696

D 1.140000 0.2508

E 1.320000 0.2904

F 0.990000 0.2178

G 0.690000 0.1518

5.4 Additional Members’ Contribution for Capital Expenditure

The actual capital expenditure may vary among ECs. In the event that the members’ contribution for
capital expenditures rate caps herein authorized are insufficient for its purpose, the EC may collect
such additional Members’ Contribution for Capital Expenditures by securing the consent of its
member-consumers for such collection through existing legal procedures, provided the expenditure
was approved by the Commission as part of such EC’s Capital Expenditure Plan. Provided further
that the additional member contribution is obtained prior to the incurrence of the indebtedness[;]
provided finally that the collection of said additional contribution shall be subject to the principles of
fairness and equity, in accordance with the objective of the EPIRA for the elimination of cross-
subsidy.

Collections made pursuant to this (sic) provisions may be subject to the audit of the Commission at
its discretion. 4

On the other hand, Resolution No. 14 provides:

NOW, THEREFORE, be it RESOLVED, as the ERC hereby RESOLVES to AMEND the

nomenclature of "Members’ Contribution for Capital Expenditures (MCC)" and the "MCC-Real
Property Tax (RPT)" to "Reinvestment Fund for Sustainable Capital Expenditures (RFSC)" and
"Provision for RPT", respectively, but the nature and purpose of the same remain, to wit:

The MCC is envisioned to fund the amortization or debt service of the ECs’ indebtedness associated
with the expansion, rehabilitation or upgrading of their existing electric power system in accordance
with their ERC-approved CAPEX Plan. The utilization of the MCC fund shall be subject to the
following conditions:

1. It shall be used solely for CAPEX or any other projects approved by the ERC and not for
any other purpose, even on a temporary basis;

2. The amounts collected for MCC fund shall be recognized as contribution from member-
consumers;

3. The amounts collected for MCC, including interest income, shall be put in a separate
account; and

4. If the member-consumer terminates his contract with the EC, the said contribution shall
not be withdrawn instead the same shall be treated as CIAC.

362 | P a g e
In the case of ECs registered under the CDA, the said member-contribution shall be converted into
member’s share capital.

In the event that the MCC rate caps are insufficient for its purpose, the EC may collect such
additional MCC by securing the consent of its member-consumers for such collection through
existing legal procedures; Provided that, the expenditure was approved by the ERC as part of the
EC’s CAPEX Plan; Provided further that, the additional MCC is obtained prior to the incurrence of
the indebtedness; Provided finally that, the collection of said additional MCC shall be subject to the
principles of fairness and equity in accordance with the objective of the EPIRA for the elimination of
cross-subsidy.  The alleged grounds for the petition are as follows:
5

(A)

THE IMPOSITION OF MCC OR RFSC BY THE ENERGY REGULATORY COMMISSION

AS A FORM OF INVESTMENT SOLICITATION TO FUND THE EXPANSION AND OTHER
CAPITAL [EXPENDITURES] OF ELECTRIC COOPERATIVES IS HIGHLY IRREGULAR[,]
OPPRESSIVE[,] AND UNCONSTITUTIONAL AS IT DIRECTLY VIOLATES THE DUE
PROCESS AND EQUAL PROTECTION CLAUSES ON PROPERTY UNDER SECTION 1
ARTICLE III OF THE 1987 CONSTITUTION.

(B)

THE MANDATORY COLLECTION OF THE MCC OR RFSC BY THE ELECTRIC

COOPERATIVES FROM ITS MEMBER-CONSUMERS WITHOUT THE PROPER EXPLICIT
ACCOUNTING ENTRIES AND ACKNOWLEDGMENT OF BEING A PATRONAGE CAPITAL
AND WITHOUT THE BENEFIT OF A FAIR RETURN OF THEIR INVESTMENTS OR
PATRONAGE CAPITAL INPUT OR CONTRIBUTIONS IS TANTAMOUNT TO TAKING A
PROPERTY WITHOUT JUST COMPENSATION AND IS VIOLATIVE OF THE PROVISION
OF SECTION 9, ARTICLE III OF THE 1987 CONSTITUTION.

(C)

THE RULING OF ERC ALLOWING THE MANDATORY COLLECTION OF MCC OR RFSC

BY THE ELECTRIC [COOPERATIVES] [ECs] IS UNDOUBTEDLY UNCONSTITUTIONAL
AS IT DIRECTLY VIOLATES SECTION 10, ARTICLE II AND SECTION 1 & 15, ARTICLE
XII OF THE 1987 CONSTITUTION.

(D)

THE UNJUST COLLECTION OF THE MCC OR RFSC BY THE ELECTRIC

COOPERATIVES AS AUTHORIZED AND RULED BY ERC IS CONTRARY TO LAW AS
NOWHERE IN THE PROVISIONS OF P.D. 269 DOES IT SAY THAT MEMBERS ON A
VOLUNTARY AND COOPERATIVE MANNER WILL PROVIDE CAPITAL TO FUND THE
CAPITAL EXPENDITURES BY THE COOPERATIVES. IT LIKEWISE VIOLATES SECTION
37 OF P.D. 269. 6

In a nutshell, the issue for petitioners is not about the nomenclature of MCC/RFSC or how such
funds are utilized but in the ERC's treatment of MCC/RFSC as a subsidy/funds for capital
expenditures (CAPEX) or contribution in aid of construction (CIAC) instead of patronage capital,
which is an equity or investment that must be accounted for and could be withdrawn by the member-
consumers upon termination of their contract with respondent ECs. 7

363 | P a g e
The petition is dismissed.

Legal standing of petitioners

Petitioners claim that as Board members/officers of the National Alliance for Consumer
Empowerment of Electric Cooperatives (NACEELCO) they have the required legal standing to assail
the validity of MCC/RFSC imposed by the ECs under the RSEC-WR and Resolution No. 14 issued
by the ERC. They also stand to be benefited or injured by the judgment in this suit because they are
member-consumers of the ECs who were required to and did pay the MCC/RFSC, as shown by the
electric bills appended to the petition. Further, over and above their personal capacity as member-
consumers, petitioners, like party-list representatives Briones of AGAP, Payuyo of Association of
Philippine Electric Cooperatives (APEC), and Ping-ay of Cooperative-National Confederation of
Cooperatives (Coop-NATCO), represent their constituents who are paying EC member-consumers
in good standing.

Even assuming that no direct injury is or will continue to be suffered, petitioners contend that the
liberal policy consistently adopted by the Court on locus standi must apply. They view that the issues
raised in this petition are of paramount public importance as it does not merely involve the
constitutionality of MCC/RFSC but also the plight of the member-consumers of ECs nationwide. For
them, the transcendental importance of this case cannot simply be ignored as it also involves the
economic wellbeing of more than half of the Philippine population. Two contesting parties are said to
be laying claim on the ownership of the ECs, to wit: (1) the persons running the ECs being directly
controlled by the NEA, which has not contributed any funds to fund debt-servicing except loan
accommodations with high interest rates, and (2) the member-consumers of ECs who have
continuously contributed their hard-earned money to fund the operations, cost, and debt-servicing of
the ECs.

Only petitioners Ping-ay and Ramirez satisfy the requirement of locus standi.

Petitioners have no legal standing to file this petition in their capacity as NACEELCO Board
members. It was not shown that respondent ECs are members of NACEELCO. Further, while
petitioners claim that they represent nine million member-consumers of the ECs, they have not
attached to the petition any documentary proof as regards their purported authority to file the case
on their behalf.

Also, petitioners Payuyo and Rosales have no legal standing to file the case as member-consumers
of the Palawan Electric Cooperative, Inc. (PALECO) and Agusan Del Norte Electric Cooperative, Inc.
(ANECO), respectively.  Even if ANECO is within the coverage of RSEC-WR, it is not impleaded as
8

respondent in the petition. As for PALECO, it is neither a part of any group enumerated in RSEC-WR
nor is it impleaded as respondent herein.

While the Court held that legislators have the standing to maintain inviolate the prerogatives, powers
and privileges vested by the Constitution in their office and are allowed to sue to question the validity
of any official action which they claim infringes their prerogatives as legislators,  there was no
9

specific allegation of usurpation of legislative function in this case. Moreover, We do not view that
the procedural rules on standing should be waived on the ground that the issues raised in this
petition are of transcendental importance. To consider a matter as one of transcendental
importance, all of the following must concur: (1) the public character of the funds or other assets
involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory
prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of
any other party with a more direct and specific interest in the questions being raised.  As will be
10

shown in the discussion below, elements (2) and (3) are obviously lacking in this case.

364 | P a g e
The above notwithstanding, petitioners Ping-ay and Ramirez have the legal standing to sue. Ping-ay
is a member-consumer of respondent Ilocos Sur Electric Cooperative, Inc. (ISECO).  On the other
11

hand, Ramirez is undisputedly the spouse of Mary Ramirez,  who is the registered member-
12

consumer of respondent Eastern Samar Electric Cooperative, Inc. (ESAMELCO). Mary, who is not
one of the petitioners, only needs to be impleaded as a pro-forma party to the suit based on Section
4, Rule 4 of the

Rules.  The determination of whether Mary is a party who is indispensable or necessary or neither
13

indispensable nor necessary would no longer matter since, as We said, Ping-ay possesses the
required locus standi for the Court to already take cognizance of the case.

It is a general rule that every action must be prosecuted or defended in the name of the real party-in-
interest, who stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By
real interest is meant a present substantial interest, as distinguished from a mere expectancy or a
future, contingent, subordinate, or consequential interest." "To qualify a person to be a real party-
ininterest in whose name an action must be prosecuted, he must appear to be the present real
owner of the right sought to be enforced."

"Legal standing" or locus standi calls for more than just a generalized grievance. The concept has
been defined as a personal and substantial interest in the case such that the party has sustained or
will sustain direct injury as a result of the governmental act that is being challenged. The gist of the
question of standing is whether a party alleges such personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions.

A party challenging the constitutionality of a law, act, or statute must show "not only that the law is
invalid, but also that he has sustained or is in immediate, or imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite
way." It must shown that he has been, or is about to be, denied some right or privilege to which he is
lawfully entitled, or that he is about to be subjected to some burdens or penalties by reason of the
statute complained of. 14

Tested by the foregoing standards, petitioners Ping-ay and Ramirez clearly have legal standing to
file the petition. They are real parties-ininterest to assail the constitutionality and legality of RSEC-
WR and Resolution No. 14. Their cause of action to declare invalid the subject Rule and Resolution
is related to their right to seek a refund of the payments made and to stop future imposition of the
MCC/RFSC.

Rule 65 as a Remedy

Despite the legal standing of petitioners Ping-ay and Ramirez, their choice of remedy to question the
validity of RSEC-WR and Resolution No. 14 is inexcusably inapposite.

Section 1, Rule 65 of the Rules mandates:

SECTION 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of

365 | P a g e
discretion amounting to lack or excess of its or his jurisdiction, and there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

xxx

The Court agrees with respondents that RSEC-WR and Resolution No. 14 were issued by the ERC
in its quasi-legislative power.

A respondent is said to be exercising judicial function where he has the power to determine what the
law is and what the legal rights of the parties are, and then undertakes to determine these questions
and adjudicate upon the rights of the parties.

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of
public administrative officers or bodies … required to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for their official action and to
exercise discretion of a judicial nature."

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that
there be a law that gives rise to some specific rights of persons or property under which adverse
claims to such rights are made, and the controversy ensuing therefrom is brought before a tribunal,
board, or officer clothed with power and authority to determine the law and adjudicate the respective
rights of the contending parties.15

As defined above, the ERC exercised neither judicial nor quasi-judicial function. In issuing and
implementing the RSEC-WR and Resolution No. 14, it was not called upon to adjudicate the rights of
contending parties to exercise, in any manner, discretion of a judicial or quasi-judicial nature.
Instead, RSEC-WR and Resolution No. 14 were done in the exercise of the ERC's quasi-legislative
and administrative functions. It was in the nature of subordinate legislation, promulgated in the
exercise of its delegated power. Quasi-legislative power is exercised by administrative agencies
through the promulgation of rules and regulations within the confines of the granting statute and the
doctrine of non-delegation of powers flowing from the separation of the branches of the
government.  Particularly, the ERC applied its rule-making power as expressly granted by Republic
16

Act (R.A.) No. 9136 ("Electric Power Industry Reform Act of 2001" or EPIRA), to wit:

SEC. 43. Functions of the ERC. - The ERC shall xxx be responsible for the following key functions in
the restructured industry:

xxxx

f. In the public interest, establish and enforce a methodology for setting transmission
and distribution wheeling rates and retail rates for the captive market of a distribution
utility, taking into account all relevant considerations, including the efficiency or inefficiency of the
regulated entities. The rates must be such as to allow the recovery of just and reasonable costs and
a reasonable return on rate base (RORB) to enable the entity to operate viably. The ERC may adopt
alternative forms of internationally-accepted rate-setting methodology as it may deem appropriate.
The rate-setting methodology so adopted and applied must ensure a reasonable price of electricity.
The rates prescribed shall be nondiscriminatory. To achieve this objective and to ensure the
complete removal of cross subsidies, the cap on the recoverable rate of system losses prescribed in
Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall

366 | P a g e
be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and
other technical considerations it may promulgate. The ERC shall determine such form of rate-setting
methodology, which shall promote efficiency. In case the rate setting methodology used is RORB, it
shall be subject to the following guidelines:

(i) For purposes of determining the rate base, the TRANSCO or any distribution utility may
be allowed to revalue its eligible assets not more than once every three (3) years by an
independent appraisal company: Provided, however, That ERC may give an exemption in
case of unusual devaluation: Provided, further, That the ERC shall exert efforts to minimize
price shocks in order to protect the consumers;

(ii) Interest expenses are not allowable deductions from permissible return on rate base;

(iii) In determining eligible cost of services that will be passed on to the end-users, the ERC
shall establish minimum efficiency performance standards for the TRANSCO and distribution
utilities including systems losses, interruption frequency rates, and collection efficiency;

(iv.) Further, in determining rate base, the TRANSCO or any distribution utility shall not be
allowed to include management inefficiencies like cost of project delays not excused by force
majeure, penalties and related interest during construction applicable to these unexcused
delays; and

(v.) Any significant operating costs or project investments of the TRANSCO

and distribution utilities which shall become part of the rate base shall be subject to
verification by the ERC to ensure that the contracting and procurement of the equipment,
assets and services have been subjected to transparent and accepted industry procurement
and purchasing practices to protect the public interest. (Emphasis supplied) 17

Granting arguendo, that the MCC/RFSC imposition is in the exercise of the ERC’s quasi-judicial
function, still, the petition should have been filed before the Court of Appeals, which may entertain a
petition for certiorari whether or not the same is in aid of its appellate jurisdiction.  Indeed,
18

petitioners violated the principle of hierarchy of courts. As We said in one case:

x x x The petitioners appear to have forgotten that the Supreme Court is a court of last resort, not a
court of first instance. The hierarchy of courts should serve as a general determinant of the
appropriate forum for Rule 65 petitions. The concurrence of jurisdiction among the Supreme Court,
Court of Appeals and the Regional Trial Courts to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and injunction does not give the petitioners
the unrestricted freedom of choice of forum. By directly filing Rule 65 petitions before us, the
petitioners have unduly taxed the Court’s time and attention which are better devoted to matters
within our exclusive jurisdiction. Worse, the petitioners only contributed to the overcrowding of the
Court's docket. We also wish to emphasize that the trial court is better equipped to resolve cases of
this nature since this Court is not a trier of facts and does not normally undertake an examination of
the contending parties’ evidence. 19

Since the Court of Appeals and the Supreme Court have original concurrent jurisdiction over
petitions for certiorari, the rule on hierarchy of courts determines the venue of recourses to these
courts. In original petitions for certiorari, this Court will not directly entertain special civil action unless
the redress desired cannot be obtained elsewhere based on exceptional and compelling
circumstances to justify immediate resort to this Court,  which We found none in the present case
20

that likewise involves factual questions. Time and again, it has been held that this Court is not a trier
of fact.
21

367 | P a g e
Glaringly, petitioners did not comply with the rule that "there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law." Since petitioners assail the validity of the ERC
issuances and seeks to declare them as unconstitutional, a petition for declaratory relief under Rule
63 of the Rules is the appropriate remedy. Under the Rules, any person whose rights are affected by
any other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and for
a declaration of his rights or duties, thereunder.
22

Noticeably, administrative remedies should have been exhausted by filing the case in the ERC,
which, has technical expertise, at the very least, to dwell on the issue. Considering that petitioners
are challenging the MCC/RFSC, which is a rate component under the RSEC-WR, the original and
exclusive jurisdiction is vested with the ERC, pursuant to Section 43 of R.A. No. 9136, which states:

SEC. 43. Functions of the ERC. - The ERC shall xxx be responsible for the following key functions in
the restructured industry:

xxxx

u. The ERC shall have the original and exclusive jurisdiction over all cases contesting
rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned
powers, functions and responsibilities and over all cases involving disputes between and among
participants or players in the energy sector. (Emphasis

supplied) 23

All actions taken by the ERC, pursuant to R.A. No. 9136, are subject to judicial review. As an
independent quasi-judicial agency in the exercise of its quasi-judicial functions, its judgment, final
order or resolution is appealable to the Court of Appeals via Rule 43 of the Rules, and, if still
unfavorable, to this Court via Rule 65.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system.  As
24

opined in a case:

The doctrine of exhaustion of administrative remedies allows administrative agencies to carry out
their functions and discharge their responsibilities within the specialized areas of their respective
competence. The doctrine entails lesser expenses and provides for the speedier resolution of
controversies. Therefore, direct recourse to the trial court, when administrative remedies are
available, is a ground for dismissal of the action.

The doctrine, however, is not without exceptions. Among the exceptions are: (1) where there
is estoppel on the part of the party invoking the doctrine; (2) where the challenged administrative act
is patently illegal, amounting to lack of jurisdiction; (3) where there is unreasonable delay or official
inaction that will irretrievably prejudice the complainant; (4) where the amount involved is relatively
so small as to make the rule impractical and oppressive; (5) where the question involved is purely
legal and will ultimately have to be decided by the courts of justice; (6) where judicial intervention is
urgent; (7) where the application of the doctrine may cause great and irreparable damage; (8) where
the controverted acts violate due process; (9) where the issue of nonexhaustion of administrative
remedies had been rendered moot; (10) where there is no other plain, speedy and adequate
remedy; (11) where strong public interest is involved; and (12) in quo warranto proceedings. 25

368 | P a g e
Assuming, for argument's sake, that this case falls under any of the recognized exceptions, just the
same, the petition must be dismissed for being filed out of time. Under the Rules, a petition
for certiorari should be filed not later than sixty (60) days from notice of the judgment, order or
resolution sought to be assailed. In this case, Resolution No. 20, which adopted the RSEC-WR, and
Resolution No. 14 were issued by the ERC on September 23, 2009 and July 6, 2011, respectively.
The petition was filed only on May 31, 2012, which is manifestly way beyond the reglementary
period.26

It is significant to note that, in drafting RSEC-WR, the ERC conducted a series of expository
hearings and public consultations for all ECs in Luzon, Visayas, and Mindanao, and that it was only
after taking into account the various manifestations, comments, and oppositions during the public
consultations that a new methodology for setting the ECs’ wheeling rates was developed.
The Whereas clauses of Resolution No. 20 narrated this long and tedious process:

WHEREAS, the current rates of ECs are no longer responsive since the costs of providing electric
service to the consumers increased significantly from the time their rates were determined by the
Commission based on 2000 test year;

WHEREAS, the ECs are cognizant of the inherent regulatory lag in the current cash flow rate-setting
methodology adopted through a quasi-judicial process which is further exacerbated by the fact that if
all the one hundred twenty (120) ECs file their respective rate applications with each application to
the resolved in one (1) month, it will take the Commission one hundred twenty (120) months or ten
(10) years, to resolved all the applications;

WHEREAS, the Commission has conducted studies to establish a new rate-setting methodology for
ECs that will address their present problems and resolve the regulatory lag in the resolution of rate
applications, particularly, the "Benchmarking Methodology";

WHEREAS, the results of said "Benchmarking Methodology" studies were subjected to several

expository and public consultations which were held on various dates and venues. The ECs
attended and actively participated in the said expository and public consultations and submitted data
to the Commission reflecting their respective costs of service as part of the "Benchmarking
Methodology' studies;

WHEREAS, the rates as determined in the said "Benchmarking Methodology" encourage the ECs to
be financially self-sufficient, efficient and member-customer responsive;

WHEREAS, on May 3 and 4, 2007, the Commission conducted a series of expository hearings for all
ECs in Luzon, Visayas and Mindanao on the proposed "Benchmarking Methodology" for ECs;

WHEREAS, on May 17, 2007, the Commission conducted a public consultation on the
"Classification of ECs for Regulatory Purposes and the Proposed Efficiency Benchmarking
Methodology";

WHEREAS, on various dates, the Commission conducted a series of Expository Public

Consultations for all ECs in Luzon, Visayas and Mindanao on the classification of on-grid ECs and
the determination of the functionalized benchmark Operation and Maintenance (O&M) rate, Capital
Expenditure (CAPEX) rate, proposed customer segmentation, proposed benchmark rate design,
new lifeline charges, performance indices, transition period and rate comparison;

369 | P a g e
WHEREAS, after considering all the comments and manifestations during the various public
consultations, the Commission developed a new methodology for setting the ECs' wheeling rates
embodied in a document denominated as "Rules for Setting the Electric Cooperatives' Wheeling
Rates" (RSEC-WR);

WHEREAS, on April 4, 2009, the General Managers of all the on-grid Electric Cooperatives (ECs) in
the Philippines adopted Resolution No. 1, Series of 2009, entitled "A Resolution Imploring Upon the
Energy Regulatory Commission to Implement a New Rate-Setting Methodology for Setting the
Electric Cooperatives' Wheeling Rates (RSEC-WR)";

WHEREAS, on April 21, 2009, the Commission issued a Notice of Proposed Rule-Making (Notice),
wherein it treated the Resolution adopted by the General Managers of all the on-grid ECs as a
petition to initiate rule-making by the ECs that are signatories thereto, docketed as ERC Case No.
2009-007 RM, entitled "In the Matter of the Petition by the On-Grid Electric Cooperatives for the
Adoption of the Rules for Setting the Electric Coopratives' Wheeling Rates". The Draft RSEC-WR
adopted the Rule-Making proceedings under Rule 21 of the Commission's Rules of Practice and
Procedure. All interested parties were directed to submit their respective comments on the Draft
RSEC-WR until May 15, 2009 and said petition was set for public hearings on various dates and
venues;

WHEREAS, on various dates, several ECs and interested parties submitted their respective
comments on the Draft RSEC-WR;

WHEREAS, from May 17 to July 20, 2009, the Commission conducted public hearings on the instant
petition at the respective localities of the ninety-six (96) on-grid ECs;

WHEREAS, on August 19, 2009, the Commission posted at its website and published in
newspapers of general circulation in the Philippines the revised Draft RSEC-WR for solicitation of
comments from interested parties;

WHEREAS, on various dates, several ECs and interested parties submitted their respective
comments on the revised Draft RSEC-WR;

WHEREAS, in accordance with the aforesaid mandate and after a careful consideration of the
various views and comments submitted by the interested parties, the Commission adopts and
promulgates the RSECWR[.] 27

As ordered by the ERC, copies of Resolution No. 20 were furnished to the University of the
Philippines Law Center – Office of the National Administrative Register (UPLC-ONAR), Philippine
Rural Electric Cooperatives' Association, Inc. (PHILRECA),  and all on-grid ECs. In addition,
28

PHILRECA was directed to publish the RSEC-WR in a newspaper of general circulation in the
Philippines.29

Petitioners could have filed their comment/opposition to the draft of RSEC-WR or appealed its final
version. Alternatively, they could have filed a comment/opposition, motion for reconsideration,
petition for relief from judgment or appeal with regard to the rate adjustment applications of their
respective ECs. The records of this case, voluminous as they are, are bereft of evidence that they
did.

Finally, it bears to stress that a petition for certiorari under Rule 65 is the proper remedy when the
respondent has committed grave abuse of discretion amounting to lack or excess of jurisdiction.

370 | P a g e
The term "grave abuse of discretion" has a specific meaning. An act of a court or tribunal can only
be considered as with grave abuse of discretion when such act is done in a "capricious or whimsical
exercise of judgment as is equivalent to lack of jurisdiction." The abuse of discretion must be so
patent and gross as to amount to an "evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion and hostility." Furthermore, the use of a petition
for certiorari is restricted only to "truly extraordinary cases wherein the act of the lower court or
quasi-judicial body is wholly void. x x x" 30

The stringent criterion imposed by the above-quoted precludes Us from giving due course to this
petition. The ERC rests on solid legal grounds as it is indubitably empowered to establish and
enforce a methodology for setting the distribution wheeling rates of respondent ECs. The delegation
of legislative powers by the Congress to the ERC is explicit in Section 43 (f) and (u) of R.A. No.
9136, which is elaborated in Section 5 (a), Rule 15 and Section 4 (n), Rule 3, respectively, of the
IRR; hence, the presumption of regularity of MCC/RFSC must be upheld.

As a new regulatory framework for the on-grid31 ECs, RSEC-WR is designed to achieve the
following:

1. Develop a tariff setting methodology that would be more responsive to the needs of the
ECs given the objectives of the EPIRA;

2. Encourage reforms in the structure and operations of the ECs for greater efficiency and
lower costs;

3. Introduce incentives in the framework that will allow efficiency gains to be shared between
the EC and the end-users; and

4. Develop a regulatory framework that will ease regulatory burden and cut down regulatory
lag for implementation.32

Prior to the RSEC-WR, the ECs operated under a cash flow regulatory regime, which allows the ECs
to generate revenues sufficient to cover payroll, operations and maintenance outlays, debt service,
including interest and allowance strictly for reinvestment purposes.  The ECs’ tariff structure was
33

equivalent to the Distribution, Supply, and Metering (DSM) Charges, which consisted of Operations
and Maintenance Expenses (OPEX), Payroll and Other Revenue Item (ORI), Capital Expenditures
(CAPEX) or Reinvestment Fund and Debt Service.  With the enactment of R.A. No. 9136, the
34

operating and the capital costs are unbundled.  The DSM Charges represent only operating costs,
35

while a separate charge, Members’ Contribution for Capital Expenditures (MCC) represent the ECs
debt service and capital expenditure requirements.  In the new tariff structure under the RSEC-WR,
36

the OPEX, Payroll and ORI are translated into DSM Charges, while the Reinvestment Fund and
Debt Service are translated into MCC. 37

As admitted by respondents, the MCC is not a new imposition on the member-consumers of the
ECs. Before the formulation of said MCC Charge, the rates of all the ECs already include a
Reinvestment Fund provision calculated at five percent (5%) of their unbundled retail rates, inclusive
of Generation, Transmission and Distribution Charges.  The intent of the RSEC-WR in translating
38

Reinvestment Fund into MCC is to recognize the fact that said MCC Charge indeed represents
contributions from the member-consumers for the expansion, rehabilitation and upgrading of the
ECs’ distribution system which should be reflected in their bills for greater transparency.  When
39

MCC was eventually designated as RFSC, only the appellation changed; its nature and purpose
remain the same.

371 | P a g e
Under Presidential Decree (P.D.) No. 269,  respondent ECs are vested with all powers necessary or
40

convenient for the accomplishment of its corporate purpose that is supportive of the declared State
policy of promoting sustainable development in the rural areas through rural electrification.  Such
41

powers include, but are not limited to the power:

xxxx

(g) To construct, purchase, lease as lessee, or otherwise acquire, and to equip, maintain,
and operate, and to sell, assign, convey, lease as lessor, mortgage, pledge, or otherwise
dispose of or encumber, electric transmission and distribution lines or systems, electric
generating plants, lands, buildings, structures, dams, plants, and equipment, and any other
real or personal property, tangible or intangible, which shall be deemed necessary,
convenient or appropriate to accomplish the purpose for which the cooperative is organized;

(h) To purchase, lease as lessee, or otherwise acquire, and to use, and exercise and to sell,
assign, convey, mortgage, pledge or otherwise dispose of or encumber franchises, rights,
privileges, licenses and easements;

xxxx

(j) To construct, acquire, own, operate and maintain electric subtransmission and distribution
lines along, upon, under and across publicly owned lands and public thoroughfares,
including, without limitation, all roads, highways, streets, alleys, bridges and causeways. In
the event of the need of such lands and thoroughfares for the primary purpose of the
government, the electric cooperative shall be properly compensated;

(j-1) To construct, acquire, own, operate and maintain generating facilities within its franchise
area. x x x

xxxx

(p) To do and perform any other acts and things, and to have and exercise any other powers
which may be necessary, convenient or appropriate to accomplish the purpose for which the
cooperative is organized. 42

Further, Section 35 of P.D. 269, which remains untouched despite amendments to the law, provides:

SEC. 35. Non-profit, Non-discriminatory, Area Coverage Operation and Service. - A cooperative
shall be operated on a non-profit basis for the mutual benefit of its members and patrons; shall, as to
rates and services make or grant no unreasonable preference or advantage to any member or
patron nor subject any member or patron to any unreasonable prejudice or disadvantage; shall not
establish or maintain any unreasonable difference as to rates or services either as between localities
or as between classes of service; shall not give, pay or receive any rebate or bonus, directly or
indirectly, or mislead its members in any manner as to rates charged for its services; and shall
furnish service on an area coverage basis; Provided, That for any extension of service which if
treated on the basis of standard terms and conditions is so costly as to jeopardize the
financial feasibility of the cooperative's entire operation, the cooperative may require such
contribution in aid of construction, such facilities extension deposit, such guarantee of minimum
usage for a minimum term or such other reasonable commitment on the part of the person to be
served as may be necessary and appropriate to remove such jeopardy, but no difference in standard
rates for use of service shall be imposed for such purpose.

372 | P a g e
x x x  (Emphasis supplied)
43

The MCC/RFSC is, therefore, an instrument to realize the foregoing statutory powers and
prerogatives of ECs. It is a charge that is vital to ensure the quality, reliability, security, and
affordability of electric power supply. To prevent any prejudice to the public interest, the ERC is
authorized to establish and enforce a methodology for setting transmission and distribution wheeling
rates and retail rates that takes into account all relevant considerations, such as the expansion or
improvement of the transmission facilities pursuant to the ERC-approved plan. 44

In closing, the Court observes that the ECs, whether under the control and supervision of the
National Electrification Administration (NEA) or registered with the Cooperative Development
Authority (CDA), use the RSEC-WR or collect MCC/RFSC contributions from their member-
consumers.  Petitioners, however, excluded as parties to this case the CDA-registered ECs, such as
45

QUIRELCO (in Group A), ABRECO (in Group B), ISELCO II (in Group C), SORECO II (in Group C),
PANELCO I (in Group D), NUVELCO (in Group D), NORECO II (in Group E), and DANECO (in
Group F), SAJELCO (in Group F), and PELCO III (in Group G).  Instead, what they impleaded were
46

the nineteen (19) off-grid  ECs, namely: BATANELCO, LUBELCO, OMECO, ORMECO, MARELCO,
47

TIELCO, ROMELCO, BISELCO, FICELCO, MASELCO, TISELCO, BANELCO, PROSIELCO,

CELCO, TAWELCO, SIASELCO, SULECO, BASELCO, and DIELCO.  It is contended that although
48

these ECs are not covered by RSEC-WR, the ERC authorizes them to collect a Reinvestment Fund
as component of their over-all rate. 49

If petitioners admit that the ECs, whether they belong to the off-grid or on-grid category and whether
they are CDA or NEA registered, are proper parties to the petition as they will either suffer or benefit
from the decision of the Court,  then they should have equally impleaded as parties to the case the
50

CDA-registered ECs and the off-grid ECs. As indispensable parties, CDA-registered ECs should
have been joined as petitioners or respondents pursuant to Section 7, Rule 3 of the Rules.  The 51

reason behind this compulsory joinder of indispensable parties is the complete determination of all
possible issues, not only between the parties themselves but also as regards other persons who
may be affected by the judgment.   While relief may be afforded to petitioners without the presence
52

of the CDA-registered ECs, it is uncertain whether the case can be finally decided on its merits
without taking into account, if not prejudicing, the rights and interests of the latter.
1âwphi1

There being no meritorious reason for Us to suspend the rules of procedure, any discussion on
substantive issues raised for resolution are unnecessary.

WHEREFORE, the petition is DISMISSED for inexcusable procedural and technical defects. Costs

against petitioner.

SO ORDERED.

373 | P a g e
 EN BANC

G.R. No. 207132, December 06, 2016

ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC.,

(AMCOW), REPRESENTED HEREIN BY ITS PRESIDENT, DR. ROLANDO
VILLOTE, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC.
AND CHRISTIAN CANGCO, Respondents.

G.R. No. 207205

HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT

OF HEALTH, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION,
INC. AND CHRISTIAN E. CANGCO, Respondents.

DECISION

BRION, J.:

In these consolidated petitions for review on certiorari1 filed under Rule 45 of the

Rules of Court, by the Association of Medical Clinics for Overseas Workers, Inc.
(AMCOW) in GR No. 207132, and by Secretary Enrique T. Ona (Secretary Ona) of the
Department of Health (DOH) in GR No. 207205, we resolve the challenge to
the August 10, 2012 decision2 and the April 12, 2013 order3 of the Regional Trial
Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.4

The August 10, 2012 decision and April 12, 2013 order declared null and void ab
initio the August 23, 2010 and November 2, 2010 orders issued by the DOH
directing respondent GCC Approved Medical Centers Association, Inc. (GAMCA) to cease
and desist from implementing the referral decking system (these orders shall be
alternately referred to as DOH CDO letters).

I. The Antecedents

On March 8, 2001, the DOH issued Administrative Order No. 5, Series of

20015(AO 5-01) which directed the decking or equal distribution of migrant
workers among the several clinics who are members of GAMCA.

AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States'
requirement that only GCC-accredited medical clinics/hospitals' examination results will
be honored by the GCC States' respective embassies. It required an OFW applicant to
first go to a GAMCA Center which, in turn, will refer the applicant to a GAMCA clinic or
hospital.

Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance

the implementation of the referral decking system. The DOH reiterated its
directive suspending the referral decking system in AO No. 159, Series of
2004.7

374 | P a g e
In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning
that the referral decking system did not guarantee the migrant workers' right to safe
and quality health service. AO 167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation
about the GAMCA referral decking system, the DOH believes that its mandate is to
protect and promote the health of the Filipino people by ensuring the rights to safe and
quality health service and reliable medical examination results through the stricter
regulation of medical clinics and other health facilities, which the referral decking
system neither assures nor guarantees.

NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby
withdraws, repeals and/or revokes Administrative Order No. 5, series of 2001,
concerning the referral decking system. Hence, all other administrative issuances,
bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby
withdrawn, repealed and/revoked accordingly.
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then
DOH Secretary Francisco T. Duque III expressed his concern about the continued
implementation of the referral decking system despite the DOH's prior suspension
directives. The DOH directed the "OFW clinics, duly accredited/licensed by the DOH
and/or by the Philippine Health Insurance Corporation (PHILHEALTH) belonging to and
identified with GAMCA x x x to forthwith stop, terminate, withdraw or otherwise
end the x x x 'referral decking system.'"10

GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the
President (OP). In a decision11 dated January 14, 2010, the OP nullified
Memorandum No. 2008-0210.

On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the

President's signature. Section 16 of RA No. 10022 amended Section 23 of RA No. 8042,
adding two new paragraphs - paragraphs (c) and (d). The pertinent portions of the
amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new
paragraphs (c) and (d) with their corresponding subparagraphs to read as follows:

(c) Department of Health. - The Department of Health (DOH) shall regulate the
activities and operations of all clinics which conduct medical, physical, optical,
dental, psychological and other similar examinations, hereinafter referred to
as health examinations, on Filipino migrant workers as requirement for their
overseas employment. Pursuant to this, the DOH shall ensure that:

(c.1) The fees for the health examinations are regulated, regularly monitored and duly
published to ensure that the said fees are reasonable and not exorbitant;

(c.2) The Filipino migrant worker shall only be required to undergo health examinations
when there is reasonable certainty that he or she will be hired and deployed to the
jobsite and only those health examinations which are absolutely necessary for the type
of job applied for or those specifically required by the foreign employer shall be
conducted;

(c.3) No group or groups of medical clinics shall have a monopoly of

375 | P a g e
exclusively conducting health examinations on migrant workers for certain
receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the
DOH-accredited or DOH-operated clinics that will conduct his/her health
examinations and that his or her rights as a patient are respected. The decking
practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall
not be allowed;

(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional
and/or provincial hospitals shall establish and operate clinics that can serve the health
examination requirements of Filipino migrant workers to provide them easy access to
such clinics all over the country and lessen their transportation and lodging expenses;
and

(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting
health examinations for Filipino migrant workers shall observe the same standard
operating procedures and shall comply with internationally accepted standards in their
operations to conform with the requirements of receiving countries or of foreign
employers/principals.

Any Foreign employer who does not honor the results of valid health examinations
conducted by a DOH-accredited or DOH-operated clinic shall be temporarily disqualified
from participating in the overseas employment program, pursuant to POEA rules and
regulations.

In case an overseas Filipino worker is found to be not medically fit upon his/her
immediate arrival in the country of destination, the medical clinic that conducted the
health examinations of such overseas Filipino worker shall pay for his or her
repatriation back to the Philippines and the cost of deployment of such worker.

Any government official or employee who violates any provision of this subsection shall
be removed or dismissed from service with disqualification to hold any appointive public
office for five (5) years. Such penalty is without prejudice to any other liability which he
or she may have incurred under existing laws, rules or regulations. [emphases and
underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. 8042,
as amended by RA No. 10022, took effect.

Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010

letter-order,14 directed GAMCA to cease and desist from implementing the
referral decking system and to wrap up their operations within three (3) days from
receipt thereof. GAMCA received its copy of the August 23, 2010 letter-order on August
25, 2010.

On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition for certiorari and
prohibition with prayer for a writ of preliminary injunction and/or temporary restraining
order (GAMCA's petition).15 It assailed: (1) the DOH's August 23, 2010 letter-order on
the ground of grave abuse of discretion; and (2) paragraphs c.3 and c.4, Section 16

376 | P a g e
of RA No. 10022, as well as Section 1 (c) and (d), Rule XI of the IRR,
as unconstitutional.

Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive
that GAMCA cease and desist from implementing the referral decking system.16

On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to
file an opposition-in-intervention, attaching its opposition-in-intervention to its
motion.17 In the hearing conducted the following day, November 24, 2010, the RTC
granted AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's
motion.18 AMCOW subsequently paid the docket fees and submitted its memorandum.19

In an order20 dated August 1, 2011, the RTC issued a writ of preliminary

injunction21 directing the DOH to cease and desist from implementing its August 23,
2010 and November 2, 2010 orders. The RTC likewise issued an order denying the
motion for inhibition/disqualification filed by AMCOW.

On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011
order.

The assailed RTC rulings

In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and

declared null and void ab initio the DOH CDO letters. It also issued a writ of prohibition
directing "the DOH Secretary and all persons acting on his behalf to cease and desist
from implementing the assailed Orders against the [GAMCA]."

The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending

Section 23 of RA No. 8042, but ruled that Section 16 of RA No. 10022 does not
apply to GAMCA.

The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted as applying only to clinics that conduct
health examination on migrant workers bound for countries that do not require the
referral decking system for the issuance of visas to job applicants.

It noted that the referral decking system is part of the application procedure in
obtaining visas to enter the GCC States, a procedure made in the exercise of the
sovereign power of the GCC States to protect their nationals from health hazards, and
of their diplomatic power to regulate and screen entrants to their territories. Under the
principle of sovereign equality and independence of States, the Philippines cannot
interfere with this system and, in fact, must respect the visa-granting procedures of
foreign states in the same way that they respect our immigration procedures.

Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC States,
is to restrain the GCC States themselves. To the RTC, the Congress was aware of this
limitation, pursuant to the generally accepted principles of international law under
Article II, Section 2 of the 1987 Constitution, when it enacted Section 16 of RA No.
10022.

377 | P a g e
The DOH and AMCOW separately sought reconsideration of the RTC's August 10, 2012
decision, which motions the RTC denied.23 The DOH and AMCOW separately filed the
present Rule 45 petitions.

On August 24, 2013, AMCOW filed a motion for consolidation24 of the two petitions; the
Court granted this motion and ordered the consolidation of the two petitions in a
resolution dated September 17, 2013.25 cralawred

In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion
for issuance of temporary restraining order/writ of preliminary injunction/status quo
ante order (with request for immediate inclusion in the Honorable Court's agenda of
March 3, 2015, its motion dated March 2, 2015);27 and (2) the most urgent reiterating
motion for issuance of temporary restraining order/writ of preliminary injunction/status
quo ante order dated March 11, 2015.28

The Court also suspended the implementation of the permanent injunction issued by
the RTC of Pasay City, Branch 108 in its August 10, 2012 decision.

II. The Issues

The consolidated cases before us present the following issues:

First, whether the Regional Trial Court legally erred in giving due course to the petition
for certiorari and prohibition against the DOH CDO letters;

Second, whether the DOH CDO letters prohibiting GAMCA from implementing the
referral decking system embodied under Section 16 of Republic Act No. 10022 violates
Section 3, Article II of the 1987 Constitution for being an undue taking of property;

Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA
violates the international customary principles of sovereign independence and equality.

III. Our Ruling

A. The RTC legally erred when it gave due course to GAMCA's petition
for certiorari  and prohibition.

The present case reached us through an appeal by certiorari (pursuant to Rule 45) of

an RTC ruling, assailing the decision based solely on questions of law. The RTC decision,
on the other hand, involves the grant of the petitions for certiorari and prohibition
(pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of discretion.

The question before us asks whether the RTC made a reversible error of law
when it issued writs of certiorari and prohibition against the DOH CDO letters.

AMCOW questions the means by which GAMCA raised the issue of the legality of RA No.
10022 before the RTC. AMCOW posits that GAMCA availed of an improper remedy,
as certiorari and prohibition lie only against quasi-judicial acts, and quasi-judicial and
ministerial acts, respectively. Since the disputed cease and desist order is neither, the
RTC should have dismissed the petition outright for being an improper remedy.

378 | P a g e
We agree with the petitioners' assertion that the RTC erred when it gave due course
to GAMCA's petition for certiorari and prohibition, but we do so for different reasons.

1. Certiorari under Rules of Court and under the courts' expanded jurisdiction
under Art VIII, Section 1 of the Constitution, as recognized by jurisprudence.

A.1.a. The Current Certiorari Situation

The use of petitions for certiorari and prohibition under Rule 65 is a remedy that

judiciaries have used long before our Rules of Court existed.29 As footnoted below,
these writs - now recognized and regulated as remedies under Rule 65 of our Rules of
Court - have been characterized a "supervisory writs" used by superior courts to keep
lower courts within the confines of their granted jurisdictions, thereby ensuring
orderliness in lower courts' rulings.

We confirmed this characterization in Madrigal Transport v. Lapanday Holdings

Corporation,30 when we held that a writ is founded on the supervisory jurisdiction of
appellate courts over inferior courts, and is issued to keep the latter within the bounds
of their jurisdiction. Thus, the writ corrects only errors of jurisdiction of judicial and
quasi-judicial bodies, and cannot be used to correct errors of law or fact. For these
mistakes of judgment, the appropriate remedy is an appeal.31

This situation changed after 1987 when the new Constitution "expanded" the scope of
judicial power by providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded
jurisdiction was meant "to ensure the potency of the power of judicial review to curb
grave abuse of discretion by 'any branch or instrumentalities of government.'" Thus, the
second paragraph of Article VIII, Section 1 engraves, for the first time in its history,
into black letter law the "expanded certiorari jurisdiction" of this Court, whose nature
and purpose had been provided in the sponsorship speech of its proponent, former
Chief Justice Constitutional Commissioner Roberto Concepcion:
xxxx

The first section starts with a sentence copied from former

Constitutions. It says:

The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.

I suppose nobody can question it.

The next provision is new in our constitutional law. I will read it first and explain.

379 | P a g e
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the government.

Fellow Members of this Commission, this is actually a product of our experience during
martial law. As a matter of fact, it has some antecedents in the past, but the role of the
judiciary during the deposed regime was marred considerably by the circumstance that
in a number of cases against the government, which then had no legal defense at all,
the solicitor general set up the defense of political question and got away with it. As a
consequence, certain principles concerning particularly the writ of habeas corpus, that
is, the authority of courts to order the release of political detainees, and other matters
related to the operation and effect of martial law failed because the government set up
the defense of political question. And the Supreme Court said: "Well, since it is political,
we have no authority to pass upon it." The Committee on the Judiciary feels that this
was not a proper solution of the questions involved. It did not merely request an
encroachment upon the rights of the people, but it, in effect, encouraged further
violations thereof during the martial law regime. x x x

xxxx

Briefly stated, courts of justice determine the limits of power of the agencies and offices
of the government as well as those of its officers. In other words, the judiciary is the
final arbiter on the question whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction, or so capriciously as
to constitute an abuse of discretion amounting to excess of jurisdiction or lack of
jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of
this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot
hereafter evade the duty to settle matters of this nature, by claiming that such matters
constitute a political question.34 (italics in the original; emphasis and underscoring
supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this
"expanded" constitutional definition of judicial power and because of the commonality
of "grave abuse of discretion" as a ground for review under Rule 65 and the courts
expanded jurisdiction, the Supreme Court based on its power to relax its rules35 allowed
Rule 65 to be used as the medium for petitions invoking the courts' expanded
jurisdiction based on its power to relax its Rules.36 This is however an ad hoc approach
that does not fully consider the accompanying implications, among them, that Rule 65
is an essentially distinct remedy that cannot simply be bodily lifted for application under
the judicial power's expanded mode. The terms of Rule 65, too, are not fully aligned
with what the Court's expanded jurisdiction signifies and requires.37

On the basis of almost thirty years' experience with the courts' expanded jurisdiction,
the Court should now fully recognize the attendant distinctions and should be aware
that the continued use of Rule 65 on an ad hoc basis as the operational remedy in
implementing its expanded jurisdiction may, in the longer term, result in problems of
uneven, misguided, or even incorrect application of the courts' expanded mandate.

380 | P a g e
The present case is a prime example of the misguided reading that may take place in
constitutional litigation: the procedural issues raised apparently spring from the lack of
proper understanding of what a petition for certiorari assails under the traditional and
expanded modes, and the impact of these distinctions in complying with the procedural
requirements for a valid petition.

2. The Basic Distinctions

A.2.a. Actual Case or Controversy

Basic in the exercise of judicial power whether under the traditional or in the expanded
setting - is the presence of an actual case or controversy. For a dispute to be
justiciable, a legally demandable and enforceable right must exist as basis, and must be
shown to have been violated.38

Whether a case actually exists depends on the pleaded allegations, as affected by the
elements of standing (translated in civil actions as the status of being a "real-
party-in-interest," in criminal actions as "offended party" and in special
proceedings as "interested party"),39ripeness,40prematurity, and the moot and
academic principle that likewise interact with one another. These elements and their
interactions are discussed m greater detail below.

The Court's expanded jurisdiction - itself an exercise of judicial power - does not do
away with the actual case or controversy requirement in presenting a constitutional
issue, but effectively simplifies this requirement by merely requiring a prima
facie showing of grave abuse of discretion in the assailed governmental act.

A.2.b. Actions Correctable by Certiorari

A basic feature of the expanded jurisdiction under the constitutional definition of judicial
power, is the authority and command for the courts to act on petitions involving the
commission by any branch or instrumentality of government of grave abuse of
discretion amounting to lack or excess of jurisdiction.

This command distinctly contrasts with the terms of Rule 65 which confines
court certiorari action solely to the review of judicial and quasi-judicial acts.41 These
differing features create very basic distinctions that must necessarily result in
differences in the application of remedies.

While actions by lower courts do not pose a significant problem because they are
necessarily acting judicially when they adjudicate, a critical question comes up for the
court acting on certiorari petitions when governmental agencies are involved - under
what capacity does the agency act?

This is a critical question as the circumstances of the present case show. When the
government entity acts quasi-judicially, the petition for certiorari challenging the action
falls under Rule 65; in other instances, the petition must be filed based on the courts'
expanded jurisdiction.

A.2.c. Grave Abuse of Discretion

381 | P a g e
Another distinction, a seeming one as explained below, relates to the cited ground of
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or
grave abuse of discretion amounting to lack or excess of jurisdiction, as against the
remedy under the courts' expanded jurisdiction which expressly only mentions grave
abuse of discretion amounting to lack or excess of jurisdiction.

This distinction is apparently not legally significant when it is considered that action
outside of or in excess of the granted authority necessarily involves action with grave
abuse of discretion: no discretion is allowed in areas outside of an agency's granted
authority so that any such action would be a gravely abusive exercise of power. The
constitutional grant of power, too, pointedly addresses grave abuse of discretion when
it amounts to lack or excess of jurisdiction,42 thus establishing that the presence of
jurisdiction is the critical element; failure to comply with this requirement necessarily
leads to the certiorari petition's immediate dismissal.43

As an added observation on a point that our jurisprudence has not fully explored, the
result of the action by a governmental entity (e.g., a law or an executive order) can be
distinguished from the perspective of its legality as tested against the terms of the
Constitution or of another law (where subordinate action like an executive order is
involved), vis-a-vis the legality of the resulting action where grave abuse of discretion
attended the governmental action or the exercise of the governmental function.

In the former, the conclusion may be plain illegality or legal error that characterized the
law or exec order (as tested, for example, under the established rules of
interpretation); no consideration is made of how the governmental entity exercised its
function. In the latter case, on the other hand, it is the governmental entity's exercise
of its function that is examined and adjudged independently of the result, with impact
on the legality of the result of the gravely abusive action.

Where the dispute in a case relates to plain legal error, ordinary court action and
traditional mode are called for and this must be filed in the lower courts based on rules
of jurisdiction while observing the hierarchy of courts.

Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is

brought into play based on the express wording of the Constitution and constitutional
implications may be involved (such as grave abuse of discretion because of plain
oppression or discrimination), but this must likewise be filed with the lowest court of
concurrent jurisdiction, unless the court highest in the hierarchy grants exemption.
Note that in the absence of express rules, it is only the highest court, the Supreme
Court, that can only grant exemptions.

From these perspectives, the use of grave abuse of discretion can spell the difference in
deciding whether a case filed directly with the Supreme Court has been properly filed.

A.2.d. Exhaustion of Available Remedies

A basic requirement under Rule 65 is that there be "no other plain, speedy and
adequate remedy found in law,"44 which requirement the expanded jurisdiction
provision does not expressly carry. Nevertheless, this requirement is not a significant

382 | P a g e
distinction in using the remedy of certiorari under the traditional and the expanded
modes. The doctrine of exhaustion of administrative remedies applies to a petition
for certiorari, regardless of the act of the administrative agency concerned, i.e.,
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely
regulatory.45

Consider in this regard that once an administrative agency has been empowered by
Congress to undertake a sovereign function, the agency should be allowed to perform
its function to the full extent that the law grants. This full extent covers the authority of
superior officers in the administrative agencies to correct the actions of subordinates, or
for collegial bodies to reconsider their own decisions on a motion for reconsideration.
Premature judicial intervention would interfere with this administrative mandate,
leaving administrative action incomplete; if allowed, such premature judicial action
through a writ of certiorari, would be a usurpation that violates the separation of
powers principle that underlies our Constitution.46

In every case, remedies within the agency's administrative process must be exhausted
before external remedies can be applied. Thus, even if a governmental entity may have
committed a grave abuse of discretion, litigants should, as a rule, first ask
reconsideration from the body itself, or a review thereof before the agency concerned.
This step ensures that by the time the grave abuse of discretion issue reaches the
court, the administrative agency concerned would have fully exercised its jurisdiction
and the court can focus its attention on the questions of law presented before it.

Additionally, the failure to exhaust administrative remedies affects the ripeness

to adjudicate the constitutionality of a governmental act, which in turn affects
the existence of the need for an actual case or controversy for the courts to
exercise their power of judicial review.47 The need for ripeness - an aspect of the
timing of a case or controversy does not change regardless of whether the issue of
constitutionality reaches the Court through the traditional means, or through the
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept
pertaining to judicial review is intrinsically connected to it; the concept of a case being
moot and academic.48

Both these concepts relate to the timing of the presentation of a controversy before the
Court ripeness relates to its prematurity, while mootness relates to a belated or
unnecessary judgment on the issues. The Court cannot preempt the actions of the
parties, and neither should it (as a rule) render judgment after the issue has already
been resolved by or through external developments.

The importance of timing in the exercise of judicial review highlights and reinforces the
need for an actual case or controversy an act that may violate a party's right. Without
any completed action or a concrete threat of injury to the petitioning party, the act is
not yet ripe for adjudication. It is merely a hypothetical problem. The challenged act
must have been accomplished or performed by either branch or instrumentality of
government before a court may come into the picture, and the petitioner must allege
the existence of an immediate or threatened injury to itself as a result of the challenged
action.

In these lights, a constitutional challenge, whether presented through the traditional

383 | P a g e
route or through the Court's expanded jurisdiction, requires compliance with the
ripeness requirement. In the case of administrative acts, ripeness manifests itself
through compliance with the doctrine of exhaustion of administrative remedies.

In like manner, an issue that was once ripe for resolution but whose resolution, since
then, has been rendered unnecessary, needs no resolution from the Court, as it
presents no actual case or controversy and likewise merely presents a hypothetical
problem. In simpler terms, a case is moot and academic when an event supervenes to
render a judgment over the issues unnecessary and superfluous.

Without the element of ripeness or a showing that the presented issue is moot and
academic, petitions challenging the constitutionality of a law or governmental act are
vulnerable to dismissal.

Not to be forgotten is that jurisprudence also prohibits litigants from immediately

seeking judicial relief without first exhausting the available administrative remedies for
practical reasons.49

From the perspective of practicality, immediate resort to the courts on issues that are
within the competence of administrative agencies to resolve, would unnecessarily clog
the courts' dockets. These issues, too, usually involve technical considerations that are
within the agency's specific competence and which, for the courts, would require
additional time and resources to study and consider.50 Of course, the Supreme Court
cannot really avoid the issues that a petition for certiorari, filed with the lower courts
may present; the case may be bound ultimately to reach the Court, albeit as an appeal
from the rulings of the lower courts.

3. Situations Where a Petition for Certiorari May Be Used

There are two distinct situations where a writ of certiorari or prohibition may be sought.
Each situation carries requirements, peculiar to the nature of each situation, that lead
to distinctions that should be recognized in the use of certiorari under Rule 65 and
under the courts' expanded jurisdiction.

The two situations differ in the type of questions raised. The first is the constitutional
situation where the constitutionality of acts are questioned. The second is the non-
constitutional situation where acts amounting to grave abuse of discretion are
challenged without raising constitutional questions or violations.

The process of questioning the constitutionality of a governmental action provides a

notable area of comparison between the use of certiorari in the traditional and the
expanded modes.

Under the traditional mode, plaintiffs question the constitutionality of a

governmental action through the cases they file before the lower courts; the defendants
may likewise do so when they interpose the defense of unconstitutionality of the law
under which they are being sued. A petition for declaratory relief may also be used to
question the constitutionality or application of a legislative (or quasi-legislative) act
before the court.51

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For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts
or exercise of functions that violate the Constitution are necessarily committed with
grave abuse of discretion for being acts undertaken outside the contemplation of the
Constitution. Under both remedies, the petitioners should comply with the traditional
requirements of judicial review, discussed below.52 In both cases, the decisions of these
courts reach the Court through an appeal by certiorari under Rule 45.

In contrast, existing Court rulings in the exercise of its expanded jurisdiction have

allowed the direct filing of petitions for certiorari and prohibition with the Court to
question, for grave abuse of discretion, actions or the exercise of a function that violate
the Constitution.53 The governmental action may be questioned regardless of whether it
is quasi-judicial, quasi-legislative, or administrative in nature. The Court's expanded
jurisdiction does not do away with the actual case or controversy requirement for
presenting a constitutional issue, but effectively simplifies this requirement by merely
requiring a prima facie showing of grave abuse of discretion in the exercise of the
governmental act.54

To return to judicial review heretofore mentioned, in constitutional cases where the

question of constitutionality of a governmental action is raised, the judicial power the
courts exercise is likewise identified as the power of judicial review - the power to
review the constitutionality of the actions of other branches of government.55 As a rule,
as required by the hierarchy of courts principle, these cases are filed with the lowest
court with jurisdiction over the matter. The judicial review that the courts undertake
requires:
1) there be an actual case or controversy calling for the exercise of judicial power;
(2) the person challenging the act must have "Standing" to challenge; he must have a
personal and substantial interest in the case such that he has sustained, or will sustain,
direct injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.56
The lower court's decision under the constitutional situation reaches the Supreme Court
through the appeal process, interestingly, through a petition for review
on certiorari under Rule 45 of the Rules of Court.

In the non-constitutional situation, the same requirements essentially apply, less

the requirements specific to the constitutional issues. In particular, there must be an
actual case or controversy and the compliance with requirements of standing, as
affected by the hierarchy of courts, exhaustion of remedies, ripeness, prematurity, and
the moot and academic principles.

A.3.a. The "Standing" Requirement

Under both situations, the party bringing suit must have the necessary "standing." This
means that this party has, in its favor, the demandable and enforceable right or interest
giving rise to a justiciable controversy after the right is violated by the offending party.

The necessity of a person's standing to sue derives from the very definition of judicial

385 | P a g e
power. Judicial power includes the duty of the courts to settle actual controversies
involving rights which are legally demandable and enforceable. Necessarily, the person
availing of a judicial remedy must show that he possesses a legal interest or right to it,
otherwise, the issue presented would be purely hypothetical and academic. This
concept has been translated into the requirement to have "standing" in judicial
review,57 or to be considered as a "real-party-in-interest" in civil actions,58 as the
"offended party" in criminal actions59 and the "interested party" in special proceedings.60

While the Court follows these terms closely in both non-constitutional cases and
constitutional cases under the traditional mode, it has relaxed the rule in constitutional
cases harrdled under the expanded jurisdiction mode. in the latter case, a prima
facie showing that the questioned governmental act violated the Constitution,
effectively disputably shows an injury to the sovereign Filipino nation who approved the
Constitution and endowed it with authority, such that the challenged act may be
questioned by any Philippine citizen before the Supreme Court.61 In this manner, the
"standing" requirement is relaxed compared with the standard of personal stake or
injury that the traditional petition requires.

The relaxation of the standing requirement has likewise been achieved through the
application of the "transcendental importance doctrine" under the traditional mode for
constitutional cases.62 (Under the traditional mode, "transcendental importance" not
only relaxes the standing requirement, but also allows immediate access to this Court,
thus exempting the petitioner from complying with the hierarchy of courts
requirement.)63

More importantly perhaps, the prima facie showing of grave abuse of discretion in

constitutional cases also implies that the injury alleged is actual or imminent, and not
merely hypothetical.

Through this approach, the Court's attention is directed towards the existence of an
actual case or controversy - that is, whether the government indeed violated the
Constitution to the detriment of the Filipino people without the distractions of
determining the existence of transcendental importance indicators unrelated to the
dispute and which do not at all determine whether the Court properly exercises its
power of judicial review.

Parenthetically, in the traditional mode, the determination of the transcendental

importance of the issue presented,64 aside from simply relaxing the standing
requirement, may result in the dilution of the actual case or controversy element
because of the inextricable link between standing and the existence of an actual case or
controversy.

Consider, in this regard, that an actual case or controversy that calls for the exercise of
judicial power necessarily requires that the party presenting it possesses the standing
to mount a challenge to a governmental act. A case or controversy exists when there is
an actual dispute between parties over their legal rights, which remains in conflict at
the time the dispute is presented before the court.65 Standing, on the other hand,
involves a personal and substantial interest in the case because the petitioner has
sustained, or will sustain, direct injury as a result of the violation of its right.66

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With the element of "standing" (or the petitioner's personal or substantial stake or
interest in the case) relaxed, the practical effect is to dilute the need to show that an
immediate actual dispute over legal rights did indeed take place and is now the subject
of the action before the court.67

In both the traditional and the expanded modes, this relaxation carries a ripple effect
under established jurisprudential rulings,68 affecting not only the actual case or
controversy requirement, but compliance with the doctrine of hierarchy of courts,
discussed in greater detail below.

A.3.b. The Hierarchy of Courts Principle

Another requirement that a certiorari petition carries, springs from the principle of

"hierarchy of courts" which recognizes the various levels of courts in the country as
they are established under the Constitution and by law, their ranking and effect of their
rulings in relation with one another, and how these different levels of court interact with
one another.69 Since courts are established and given their defined jurisdictions by law,
the hierarchy of the different levels of courts should leave very little opening for
flexibility (and potential legal questions), but for the fact that the law creates courts at
different and defined levels but with concurrent jurisdictions.

The Constitution itself has partially determined the judicial hierarchy in the Philippine
legal system by designating the Supreme Court as the highest court with irreducible
powers; its rulings serve as precedents that other courts must follow70 because they
form part of the law of the land.71 As a rule, the Supreme Court is not a trial court and
rules only on questions of law, in contrast with the Court of Appeals and other
intermediate courts72 which rule on both questions of law and of fact. At the lowest level
of courts are the municipal and the regional trial courts which handle questions of fact
and law at the first instance according to the jurisdiction granted to them by law.

Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the

regional trial courts and the higher courts, all the way up to the Supreme Court. As a
general rule, under the hierarchy of courts principle, the petition must be brought to
the lowest court with jurisdiction;73 the petition brought to the higher courts may be
dismissed based on the hierarchy principle. Cases, of course, may ultimately reach the
Supreme Court through the medium of an appeal.

The recognition of exceptions to the general rule is provided by the Supreme Court
through jurisprudence, i.e., through the cases that recognized the propriety of filing
cases directly with the Supreme Court. This is possible as the Supreme Court has the
authority to relax the application of its own rules.74

As observed above, this relaxation waters down other principles affecting the remedy
of certiorari. While the relaxation may result in greater and closer supervision by the
Court over the lower courts and quasi-judicial bodies under Rule 65, the effect may not
always be salutary in the long term when it is considered that this may affect the
constitutional standards for the exercise of judicial power, particularly the existence of
an actual case or controversy.

The "transcendental importance" standard, in particular, is vague, open-ended and

387 | P a g e
value-laden, and should be limited in its use to exemptions from the application of the
hierarchy of courts principle. It should not carry any ripple effect on the constitutional
requirement for the presence of an actual case or controversy.

4. The petition for certiorari  and prohibition against the DOH Letter was filed
before the wrong court.

In the present case, the act alleged to be unconstitutional refers to the cease and desist
order that the DOH issued against GAMCA's referral decking system. Its
constitutionality was questioned through a petition for certiorari and prohibition before
the RTC. The case reached this Court through a Rule 45 appeal by certiorari under the
traditional route.

In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA

committed several procedural lapses that rendered its petition readily dismissible by
the RTC. Not only did the petitioner present a premature challenge against an
administrative act; it also committed the grave jurisdictional error of filing the
petition before the wrong court.

A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-
judicial functions, and could be assailed through Rule 65 on certiorari  and
prohibition.

A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to

an individual or group within the coverage of the law containing the policy.

The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of

Batangas,75 recognized the difficulty of d fining the precise demarcation line between
what are judicial and what are administrative or ministerial functions, as the exercise of
judicial functions may involve the performance of legislative or administrative duties,
and the performance of administrative or ministerial duties may, to some extent,
involve the exercise of functions judicial in character. Thus, the Court held that
the nature of the act to be performed, rather than of the office, board, or body
which performs it, should determine whether or not an action is in the discharge of a
judicial or a quasi-judicial function.76

Generally, the exercise of judicial functions involves the determination of what the law
is, and what the legal rights of parties are under this law with respect to a matter in
controversy. Whenever an officer is clothed with this authority and undertakes to
determine those questions, he acts judicially.77

In the administrative realm, a government officer or body exercises a quasi-judicial

function when it hears and determines questions of fact to which the legislative policy is
to apply, and decide, based on the law's standards, matters relating to the enforcement
and administration of the law.78

The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral
decking system practice within three days from receipt of the letter. By issuing this
CDO letter implementing Section 16 of RA No. 10022, the DOH (1) made the finding of
fact that GAMCA implements the referral decking system, and (2) applied Section 16 of

388 | P a g e
RA No. 10022, to conclude that GAMCA's practice is prohibited by law and should be
stopped.

From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter
determined a question of fact, and applied the legislative policy prohibiting the referral
decking system practice.

Notably, cease and desist orders have been described and treated as quasi-judicial acts
in past cases, and had even been described as similar to the remedy of injunction
granted by the courts.79

A.4.b. The petitions for certiorari  and prohibition against the DOH CDO letters
fall within the jurisdiction of the Court of Appeals.

Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it
before the courts of law had been erroneous; the RTC should not have entertained
GAMCA's petition.

First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy

involves a Rule 43 appeal or a Rule 65 petition for certiorari, is cognizable by the Court
of Appeals. In particular, Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty
(60) days from notice of the judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions
of a lower court or of a corporation, board, officer or person, in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it
involves the acts or omissions of a quasi-judicial agency, unless otherwise
provided by law or these Rules, the petition shall be filed in and cognizable
only by the Court of Appeals. (emphasis, italics, and underscoring supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial
capacity, the petition challenging its CDO letter should have been filed before the Court
of Appeals. The RTC thus did not have jurisdiction over the subject matter of the
petitions and erred in giving due course to the petition for certiorari and prohibition
against the DOH CDO letters. In procedural terms, petitions for certiorari and
prohibition against a government agency are remedies avaiJable to assail its quasi-
judicial acts, and should thus have been filed before the CA.

The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-

judicial acts to be filed with the CA is in full accord with Section 9 of Batas Pambansa
Blg. 12980 on the same point. Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;

389 | P a g e
 xxxx

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders

or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities,
boards or commission, including the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court
in accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the
third paragraph and subparagraph 4 of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.

xxxx

(emphases, italics, and underscoring supplied)

Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive
original jurisdiction to entertain petitions for certiorari and prohibition against quasi-
judicial agencies. In short, GAMCA filed its remedy with the wrong court.

A.4.c The petitions for  certiorari and prohibition against the DOH CDO letters
were premature challenges - they failed to comply with the requirement that
there be "no other plain, speedy and adequate remedy" and with the doctrine
of exhaustion of administrative remedies.

Second, the Regional Trial Court of Pasay City unduly disregarded the requirements
that there be "no other plain, speedy and adequate remedy at law" and the doctrine of
exhaustion of administrative remedies, when it gave due course to the certiorari and
prohibition petition against the DOH's CDO.

Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the DOH
Secretary "shall have supervision and control over the bureaus, offices, and agencies
under him"82 and "shall have authority over and responsibility for x x x operation" of the
Department.

Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections
1 and 17 of the Constitution,83 on the other hand, provides that the "President shall
have control of all the executive departments, bureaus, and offices."

These provisions both signify that remedies internal to the Executive Branch exist
before resorting to judicial remedies: GAMCA could ask the DOH Secretary to
reconsider or clarify its letter-order, after which it could appeal, should the ruling be
unfavorable, to the Office of the President.

Significantly, this was what GAMCA did in the past when the DOH issued Memorandum
Order No. 2008-0210 that prohibited the referral decking system. GAMCA then asked
for the DOH Secretary's reconsideration, and subsequently appealed the DOH's
unfavorable decision with the Office of the President. The OP then reversed
Memorandum Order No. 2008-0210 and allowed the referral decking system to
continue.

390 | P a g e
That GAMCA had earlier taken this course indicates that it was not unaware of the
administrative remedies available to it; it simply opted to disregard the doctrine of
exhaustion of administrative remedies and the requirement that there be no other
plain, speedy, and adequate remedy in law when it immediately filed its petition
for certiorari with the RTC.

This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition
outside the exceptions that we recognized in the past in relaxing strict compliance with
the exhaustion of administrative remedies requirement.

Jurisprudence84 shows that this Court never hesitated in the past in relaxing the
application of the rules of procedure to accommodate exceptional circumstances when
their strict application would result in injustice. These instances, founded as they are on
equitable considerations, do not include the undue disreiard of administrative remedies,
particularly when they are readily available.85

A.4.d. The petitions for certiorari  and prohibition against the DOH CDO letters
should have been dismissed outright, as Rule 65 Petitions for Certiorari and
Prohibition are extraordinary remedies given due course only upon compliance
with the formal and substantive requirements.

Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary
writs, and that the handling court possesses the authority to dismiss them outright for
failure to comply with the form and substance requirements. Section 6, Rule 65 of the
Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance
to justify suclr process, the court shall issue an order requiring the respondent or
respondents to comment on the petition within ten (10) days from receipt of a copy
thereof. Such order shall be served on the respondents in such manner as the court
may direct together with a copy of the petition and any annexes thereto. (emphasis,
italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the
petition for certiorari and prohibition for its compliance with the Rule 65 requirements.
At that point, the petition for certiorari and prohibition should have been dismissed
outright, for failing to comply with Section 1 and Section 4 of Rule 65. When the court
instead took cognizance of the petition, it acted on a matter outside its jurisdiction.

Consequently, the RTC's resulting judgment is void and carries no legal effect. The
decision exempting GAMCA from the application of the referral decking system should
equally have no legal effect.

Noncompliance with the Section 1, Rule 65 requirement that there be no other plain,
speedy, and adequate remedy in law, on the other hand, is more than just a pro-forma
requirement in the present case. Since the petitions for certiorari and prohibition
challenge a governmental act - i.e. action under the DOH CDO letters, as well as the
validity of the instruments under which these letters were issued - compliance with
Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the
exhaustion of administrative remedies is also an aspect of ripeness in deciding a
constitutional issue.

391 | P a g e
Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible
for failure to first exhaust administrative remedies; the constitutional issues GAMCA
posed before the RTC were not also ripe for adjudication.

5. The Regional Trial Court erred in finding grave abuse of discretion on the
part of the DOH's issuance of the DOH CDO letters.

On the merits, we find that the RTC of Pasay reversibly erred in law when it held that
the DOH acted with grave abuse of discretion m prohibiting GAMCA from implementing
the referral decking system.

In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the
RTC of Pasay City noted that the regulation per se was not unconstitutional, but its
application to GAMCA would violate the principle of sovereign equality and
independence.

While we agree with the RTC's ultimate conclusion upholding the constitutionality of the
prohibition against the referral decking system under RA No. 10022, our agreement
proceeds from another reason; we disagree that the prohibition does not apply to
GAMCA and with the consequent ruling nullifying the DOH's CDO Letter.

A.5.a. The prohibition against the referral decking system under Section 16,
RA No. 10022, is a valid exercise of police power.

In its comment, GAMCA asserts that implementing the prohibition against the referral
decking system would amount to an undue taking of property that violates Article II,
Section 2 of the 1987 Constitution.

It submits that the Securities and Exchange Commission had in fact approved its
Articles of Incorporation and Bylaws that embody the referral decking system; thus, the
DOH cannot validly prohibit the implementation of this system.

GAMCA further claims that its members made substantial investments to upgrade their
facilities and equipment. From this perspective, the August 23, 2010 order constitutes
taking of property without due process of law as its implementation would deprive
GAMCA members of their property.

AMCOW responded to these claims with the argument that the DOH CDO letters
implementing RA No. 10022 are consistent with the State's exercise of the police power
to prescribe regulations to promote the health, safety, and general welfare of the
people. Public interest justifies the State's interference in health matters, since the
welfare of migrant workers is a legitimate public concern. The DOH thus merely
performed its duty of upholding the migrant workers' freedom to consult their chosen
clinics for the conduct of health examinations.

We agree with AMCOW.

The State's police power86 is vast and plenary87 and the operation of a

business,88 especially one that is imbued with public interest (such as healthcare

392 | P a g e
services),89 falls within the scope of governmental exercise of police power through
regulation.

As defined, police power includes (1) the imposition of restraint on liberty or property,
(2) in order to foster the common good.90 The exercise of police power involves the
"state authority to enact legislation that may interfere with personal liberty or property
in order to promote the general welfare."91

By its very nature, the exercise of the State's police power limits individual rights and
liberties, and subjects them to the "far more overriding demands and requirements of
the greater number."92 Though vast and plenary, this State power also carries
limitations, specifically, it may not be exercised arbitrarily or unreasonably. Otherwise,
it defeats the purpose for which it is exercised, that is, the advancement of the public
good.93

To be considered reasonable, the government's exercise of police power must satisfy

the "valid object and valid means" method of analysis: first, the interest of the public
generally, as distinguished from those of a particular class, requires interference;
and second, the means employed are reasonably necessary to attain the objective
sought and not unduly oppressive upon individuals.94

These two elements of reasonableness are undeniably present in Section 16 of RA No.

10022. The prohibition against the referral decking system is consistent with the State's
exercise of the police power to prescribe regulations to promote the health, safety, and
general welfare of the people. Public interest demands State interference on health
matters, since the welfare of migrant workers is a legitimate public concern.

We note that RA No. 10022 expressly reflects the declared State policies to "uphold the
dignity of its citizens whether in the country or overseas, in general, and Filipino
migrant workers," and to "afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all. Towards this end, the State shall provide adequate and timely
social, economic and legal services to Filipino migrant workers." The prohibition against
the referral decking system in Section 16 of RA No. 10022 is an expression and
implementation of these state policies.

The guarantee under Section 16 for OFWs to be given the option to choose a quality
healthcare service provider as expressed in Section 16 (c)95 of RA No. 10022 is
guaranteed by the prohibition against the decking practice and against monopoly
practices in OFW health examinations.96

Section 16 likewise requires employers to accept health examinations from any DOH-
accredited health facility; a refusal could lead to their temporary disqualification under
pertinent rules to be formulated by the Philippine Overseas Employment Authority
(POEA).97

These rules are part of the larger legal framework to ensure the Overseas Filipino
Workers' (OFW) access to quality healthcare services, and to curb existing practices
that limit their choices to specific clinics and facilities.

393 | P a g e
Separately from the Section 16 prohibition against the referral decking system, RA No.
10022 also prohibits and penalizes the imposition of a compulsory exclusive
arrangement requiring OFWs to undergo health examinations only from specifically
designated medical clinics, institutions, entities or persons. Section 5, in relation to
Section 6 of RA No. 10022, penalizes compulsory, exclusive arrangements98 by
imprisonment and fine and by the automatic revocation of the participating medical
clinic's license.

The DOH's role under this framework is to regulate the activities and operations of all
clinics conducting health examinations on Filipino migrant workers as a requirement for
their overseas employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-
accredited or DOH-operated clinics that will conduct his/her health examinations and
that his or her rights as a patient are respected. The decking practice, which requires
an overseas Filipino worker to go first to an office for registration and then farmed out
to a medical clinic located elsewhere, shall not be allowed;99
While Section 16 of RA No. 10022 does not specifically define the consequences of
violating the prohibition against the referral decking system, Republic Act No. 4226
(Hospital Licensure Act), which governs the licensure and regulation of hospitals and
health facilities, authorizes the DOH to suspend, revoke, or refuse to renew the license
of hospitals and clinics violating the law.100

These consequences cannot but apply to the violation of the prohibition against the
referral decking system under RA No. 10022. If, under the law, the DOH can suspend,
revoke, or refuse to renew the license of these hospitals upon the finding that they
violated any provision of law (whether those found in RA No. 4226 or in RA No. 10022),
it follows- as a necessarily included lesser power - that the DOH can likewise order
these clinics and their association to cease and desist from practices that the law deems
to be undesirable.

A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH
CDO letters.

As discussed above, the letter-order implementing the prohibition against the referral
decking system is quasi-judicial in nature. This characteristic requires that procedural
due process be observed - that is, that the clinics concerned be given the opportunity to
be heard before the standard found in the law can be applied to them.

Thus, prior to the issuance of the disputed CDO letter, the DOH should have given
GAMCA the opportunity to be heard on whether the prohibition applies to it. Lest this
opportunity to be heard be misunderstood, this DOH obligation raises an issue different
from the question of whether Congress can, under the exercise of police power, prohibit
the referral decking system; this latter issue lies outside the scope of the DOH to pass
upon. The required hearing before the DOH relates solely to whether it properly
implemented, based on the given standards under the law, the prohibition that
Congress decreed under RA No. 10022.

394 | P a g e
Under normal circumstances, the issuance of a CDO without a prior hearing would
violate GAMCA's procedural due process rights, and would amount to more than a legal
error, i.e., an error equivalent to action without jurisdiction. Rendering a decision quasi-
judicial in nature without providing the opportunity to be heard amounts to a grave
abuse of discretion that divests a quasi-judicial agency of its jurisdiction.

Factual circumstances unique to the present case, however, lead us to conclude that
while it was an error of law for the DOH to issue a CDO without complying with the
requirements of procedural due process, its action did not amount to a grave abuse of
discretion.

Grave abuse of discretion amounts to more than an error of law; it refers to an act that
is so capricious, arbitrary, and whimsical that it amounts to a clear evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law, as where the power is
exercised in an arbitrary and despotic manner because of passion or hostility.101

Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to
determine that GAMCA practices the prohibited referral decking system under RA No.
10022. Notably, the DOH had earlier allowed and recognized the referral decking
system that GAMCA practiced through AO 5-01. This recognition was made with
GAMCA's practice in mind. The subsequent administrative orders and department
memorandum suspending and terminating the referral decking system, respectively, all
pertain to the practice that the DOH had authorized under AO 5-01. Even the subject
matter of these issuances do not just pertain to any other referral decking system, but
to the "GAMCA referral decking system."

GAMCA likewise had more than several opportunities to contest the suspension and
eventual revocation of the referral decking system initially pe1mitted under AO 5-01.
Its appeal even reached the Office of the President, which overturned the DOH
Memorandum Order terminating the referral decking system.

That the referral decking system had been subsequently prohibited by law shows the
intent of Congress to prevent and prohibit the practice that GAMCA initiated and which
the President had allowed. The President's duty under our political system is to
implement the law; hence, when Congress subsequently prohibited the practice that
GAMCA initiated, the Executive - including the President -has no choice but to
implement it.

Based on these circumstances, while the DOH erred when it issued its CDO letters
without first giving GAMCA the opportunity to prove whether the practice conducted by
GAMCA is the same practice prohibited under RA No. 10022, the DOH conclusion to so
act, in our view, did not constitute grave abuse of discretion that would have divested it
of jurisdiction.

We note that the DOH had sufficient basis when it determined that the referral decking
system prohibited under RA No. 10022 was the same decking system practiced by
GAMCA. To reiterate, the referral decking system was not something new; it was an old
system that GAMCA practiced and was known to all in its scope and operating details.
That GAMCA had previously questioned the DOH prohibition and had been given ample
opportunity to be heard when it filed an appeal before the OP, negate the conclusion

395 | P a g e
that GAMCA had been aggrieved by precipitate and unfair DOH action.

To be sure, these factual circumstances do not make the CDO letter compliant with
procedural due process. They mitigate, however, the error committed and render it less
than the capricious, arbitrary, and patent refusal to comply with a positive legal duty
that characterizes an act committed with grave abuse of discretion.

The Court furthermore, in several instances,102 has recognized that an administrative

agency may issue an ex parte cease and desist order, where vital public interests
outweigh the need for procedural due process." In these instances, the Court noted that
the affected establishment may contest the ex parte order, upon which the
administrative agency concerned must conduct a hearing and allow the establishment
to be heard. While jurisprudence has so far used the "vital public interests" standard to
pollution cases, it had not been a grave abuse of discretion on the part of the DOH to
consider that GAMCA's referral decking practice falls within this category. The DOH has
long made the factual finding that the referral decking system hinders our Filipino
seafarers' access to quality and affordable healthcare in its A.O. No. 106, series of
2002.

These circumstances further mitigate whatever legal error the DOH has committed and
render the conclusion that grave abuse of discretion had taken place misplaced.

Since the writs of certiorari and prohibition do not issue against legal errors, but to acts
of grave abuse of discretion, the RTC erred in issuing these writs against the DOH CDO
letters.

6. The prohibition against the referral decking system against GAMCA does not
violate the principle of sovereign equality and independence.

The RTC based its decision to grant the writs of certiorari and prohibition against the
DOH letter-order on the principle of sovereign equality and independence; applying the
referral decking system prohibition against GAMCA violates this principle.

The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted to apply only to clinics conducting
health examinations on migrant workers bound for countries that do not require the
referral decking system for the issuance of visas to job applicants.

The RTC observed, too, that the refer al decking system is part of the application
procedure in obtaining visas to enter the GCC States, a procedure made in the exercise
of the sovereign power of the GCC States to protect their nationals from health
hazards, and of their diplomatic power to regulate and screen entrants to their
territories.

It also reasoned out that under the principle of sovereign equality and independence of
States, the Philippines cannot interfere with this system and in fact must respect the
visa-granting procedures of foreign states in the same way that they respect our
immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct of HMC
(an agent of GCC States) is to restrain the GCC States themselves.

396 | P a g e
AMCOW contests the RTC's conclusion, arguing that the principles of sovereign equality
and independence of States do not apply to the present case. According to AMCOW, the
subject matter of this case pertains to a domestic concern as the law and the
regulations that GAMCA assails relate to the operation of medical clinics in the
Philippines.

It points out that the Philippines gave GAMCA and its members the privilege of
conducting their businesses domestically; hence, their operations are governed by
Philippine laws, specifically by RA No. 10022 which serves as one of the limitations on
the privilege granted to them. GAMCA's right to engage in business should yield to the
State's exercise of police power. In legal contemplation, therefore, the DOH CDO letters
did not prejudice GAMCA's right to engage in business; nor did they hamper the GAMCA
members' business operations.

AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are
consistent with the State's exercise of the police power to prescribe regulations to
promote the health, safety, and general welfare of the people. Public interest demands
State interference on health matters, since the welfare of migrant workers is a
legitimate public concern. The DOH thus merely performed its duty of upholding the
migrant workers' freedom to choose any of its accredited or operated clinics that will
conduct health examinations.

The DOH, for its part, adds that the implementation of RA No. 10022 cannot be
defeated by agreements entered into by GAMCA with the GCC States. The GCC States,
the DOH points out, are not empowered to determine the Philippines' courses of action
with respect to the operation, within Philippine territory, of medical clinics; the conduct
of health examinations; and the freedom of choice of Filipino migrant workers.

GAMCA responds to these arguments by asserting that the referral decking system is a
part of the application procedure for obtaining visas to enter the GCC States. Hence, it
is an exercise of the sovereign power of the GCC States to protect their nationals from
health hazards, and their diplomatic power to regulate and screen entrants to their
territories. To restrain an agent of the GCC States under the control and acting in
accordance with the direction of these GCC States, restrains the GCC States.

GAMCA also points out that the OFWs would suffer grave and irreparable damage and
injury if the DOH CDO letters would be implemented as the GCC States would not issue
working visas without the GAMCA seal attesting that the OFWs had been medically
examined by GAMCA member clinics.

After considering all these arguments, we find that the RTC's decision misapplied the
principle of sovereign independence and equality to the present case. While the
principles of sovereign independence and equality have been recognized in Philippine
jurisprudence, our recogmtmn of this principle does not extend to the exemption of
States and their affiliates from compliance with Philippine regulatory laws.

A.6. The principle of sovereign equality and independence of states does not
exempt GAMCAfrom the referral decking system prohibition under RA No.
10022.

397 | P a g e
In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign
independence and equality as part of the law of the land. We used this principle to
justify the recognition of the principle of sovereign immunity which exempts the State -
both our Government and foreign governments - from suit. We held:
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our land
under Article II, Section 2 of the 1987 Constitution. The rule that a State may not be
sued without its consent is a necessary consequence of the principles of independence
and equality of States. As enunciated in Sanders v. Veridiano II, the practical
justification for the doctrine of sovereign immunity is that there can be no legal right
against the authority that makes the law on which the right depends. In the case of
foreign States, the rule is derived from the principle of the sovereign equality of States,
as expressed in the maxim par in parem non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. A contrary attitude would
"unduly vex the peace of nations."
Our recognition of sovereign immunity, however, has never been unqualified. While we
recognized the principles of independence and equality of States to justify a State's
sovereign immunity from suit, we also restricted state immunity to acts jus imperii, or
public acts. We said that once a State enters into commercial transactions (jus
gestionis), then it descends to the level of a private individual, and is thus not immune
from the resulting liability and consequences of its actions.104

By this recognition, we acknowledge that a foreign government acting in its jus

imperii function cannot be held liable in a Philippine court. Philippine courts, as part of
the Philippine government, cannot and should not take jurisdiction over cases involving
the public acts of a foreign government. Taking jurisdiction would amount to authority
over a foreign government, and would thus violate the principle of sovereign
independence and equality.105

This recognition is altogether different from exempting governments whose agents are
in the Philippines from complying with our domestic laws.106 We have yet to declare in a
case that the principle of sovereign independence and equality exempts agents of
foreign governments from compliance with the application of Philippine domestic law.

In the present case, GAMCA has not adduced any evidence in the court below, nor has
it presented any argument before us showing that the principle of sovereign equality
and independence has developed into an international custom shielding state agents
from compliance with another state's domestic laws. Under this situation, the Court is in
no position to determine whether the practice that GAMCA alleges has indeed
crystallized into an international custom.

GAMCA has never proven in this case, too, that the GCC has extended its sovereign
immunity to GAMCA. Sovereign immunity belongs to the State, and it must first be
extended to its agents before the latter may be considered to possess sovereign
immunity.

Significantly, the Court has even adopted a restrictive approach in recognizing state
immunity, by distinguishing between a State's jus imperii and jus gestionis. It is only
when a State acts in its jus imperii function that we recognize state immunity.107

398 | P a g e
We point out furthermore that the prohibition against the referral decking system
applies to hospitals and clinics, as well as to OFW employers, and does not seek to
interfere with the GCC's visa requirement processes. RA 10022 prohibits hospitals and
clinics in the Philippines from practicing the referral decking system, and employers
from requiring OFWs to procure their medical examinations from hospitals and clinics
practicing the referral decking system.

The regulation applies to Philippine hospitals and clinics, as well as to employers of

OFWs. It does not apply to the GCCs and their visa processes. That the regulation could
affect the OFWs' compliance with the visa requirements imposed by GCCs does not
place it outside the regulatory powers of the Philippine government.

In the same manner, GCC states continue to possess the prerogative to apply their visa
requirements to any foreign national, including our OFWs, who seeks to enter their
territory; they may refuse to grant them entry for failure to comply with the referral
decking system, or they may adjust to the prohibition against the referral decking
system that we have imposed. These prerogatives lie with the GCC member-states and
do not affect at all the legality of the prohibition against the referral decking system.

Lastly, the effect of the prohibition against the referral decking system is beyond the
authority of this Court to consider. The wisdom of this prohibition has been decided by
Congress, through the enactment of RA No. 10022. Our role in this case is merely to
determine whether our government has the authority to enact the law's prohibition
against the referral decking system, and whether this prohibition is being implemented
legally. Beyond these lies the realm of policy that, under our Constitution's separation
of powers, this Court cannot cross.

WHEREFORE, in the light of these considerations, we hereby GRANT the petitions.

Accordingly, we REVERSE and SET ASIDE the orders dated August 10, 2012 and April
12, 2013 of the Regional Trial Court of Pasay City, Branch 108, in Sp. Civil Action No.
R-PSY-10-04391-CV.

Costs against respondent GAMCA.

SO ORDERED.  cralawlawlibrary

399 | P a g e
 EN BANC

G.R. No. 211833, April 07, 2015

FERDINAND R. VILLANUEVA, PRESIDING JUDGE, MCTC, COMPOSTELA-NEW

BATAAN, COMPOSTELA VALLEY PROVINCE, Petitioner, v. JUDICIAL AND BAR
COUNCIL, Respondent.

DECISION

REYES, J.:

Presiding Judge Ferdinand R. Villanueva (petitioner) directly came to this Court via a

Petition for Prohibition, Mandamus, and Certiorari, and Declaratory Relief1 under Rules
65 and 63 of the Rules of Court, respectively, with prayer for the issuance of a
temporary restraining order and/or writ of preliminary injunction, to assail the policy of
the Judicial and Bar Council (JBC), requiring five years of service as judges of first-level
courts before they can qualify as applicant to second-level courts, on the ground that it
is unconstitutional, and was issued with grave abuse of discretion. chanRoblesvirtualLawlibrary

The Facts

The petitioner was appointed on September 18, 2012 as the Presiding Judge of the
Municipal Circuit Trial Court, Compostela-New Bataan, Poblacion, Compostela Valley
Province, Region XI, which is a first-level court. On September 27, 2013, he applied for
the vacant position of Presiding Judge in the following Regional Trial Courts (RTCs):
Branch 31, Tagum City; Branch 13, Davao City; and Branch 6, Prosperidad, Agusan Del
Sur.

In a letter2 dated December 18, 2013, JBC's Office of Recruitment, Selection and

Nomination, informed the petitioner that he was not included in the list of candidates
for the said stations. On the same date, the petitioner sent a letter, through electronic
mail, seeking reconsideration of his non-inclusion in the list of considered applicants
and protesting the inclusion of applicants who did not pass the prejudicature
examination.

The petitioner was informed by the JBC Executive Officer, through a letter3 dated
February 3, 2014, that his protest and reconsideration was duly noted by the JBC en
banc. However, its decision not to include his name in the list of applicants was upheld
due to the JBC's long-standing policy of opening the chance for promotion to second-
level courts to, among others, incumbent judges who have served in their current
position for at least five years, and since the petitioner has been a judge only for more
than a year, he was excluded from the list. This caused the petitioner to take recourse
to this Court.

In his petition, he argued that: (1) the Constitution already prescribed the qualifications
of an RTC judge, and the JBC could add no more; (2) the JBC's five-year requirement
violates the equal protection and due process clauses of the Constitution; and (3) the
JBC's five-year requirement violates the constitutional provision on Social Justice and

400 | P a g e
Human Rights for Equal Opportunity of Employment. The petitioner also asserted that
the requirement of the Prejudicature Program mandated by Section 104 of Republic Act
(R.A.) No. 85575 should not be merely directory and should be fully implemented. He
further alleged that he has all the qualifications for the position prescribed by the
Constitution and by Congress, since he has already complied with the requirement of 10
years of practice of law.

In compliance with the Court's Resolution6 dated April 22, 2014, the JBC7 and the Office
of the Solicitor General (OSG)8separately submitted their Comments. Summing up the
arguments of the JBC and the OSG, they essentially stated that the petition is
procedurally infirm and that the assailed policy does not violate the equal protection
and due process clauses. They posited that: (1) the writ of certiorari and prohibition
cannot issue to prevent the JBC from performing its principal function under the
Constitution to recommend appointees to the Judiciary because the JBC is not a tribunal
exercising judicial or quasi-judicial function; (2) the remedy of mandamus and
declaratory relief will not lie because the petitioner has no clear legal right that needs to
be protected; (3) the equal protection clause is not violated because the classification of
lower court judges who have served at least five years and those who have served less
than five years is valid as it is performance and experience based; and (4) there is no
violation of due process as the policy is merely internal in nature. chanRoblesvirtualLawlibrary

The Issue

The crux of this petition is whether or not the policy of JBC requiring five years of
service as judges of first-level courts before they can qualify as applicant to second-
level courts is constitutional.

Ruling of the Court

Procedural Issues:

Before resolving the substantive issues, the Court considers it necessary to first
determine whether or not the action for certiorari, prohibition and mandamus, and
declaratory relief commenced by the petitioner was proper.

One. The remedies of certiorari and prohibition are tenable. "The present Rules of

Court uses two special civil actions for determining and correcting grave abuse of
discretion amounting to lack or excess of jurisdiction. These are the special civil actions
for certiorari and prohibition, and both are governed by Rule 65."9 As discussed in the
case of Maria Carolina P. Araullo, etc., et al. v. Benigno Simeon C. Aquino III, etc., et
al.,10 this Court explained that:
chanroblesvirtuallawlibrary

With respect to the Court, however, the remedies of certiorari and prohibition are
necessarily broader in scope and reach, and the writ of certiorari or prohibition may be
issued to correct errors of jurisdiction committed not only by a tribunal, corporation,
board or officer exercising judicial, quasi-judicial or ministerial functions but also to set
right, undo and restrain any act of grave abuse of discretion amounting to lack or
excess of jurisdiction by any branch or instrumentality of the Government, even if the
latter does not exercise judicial, quasi-judicial or ministerial functions. This application
is expressly authorized by the text of the second paragraph of Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate remedies to raise

401 | P a g e
constitutional issues and to review and/or prohibit or nullify the acts of legislative and
executive officials.11 (Citation omitted)
In this case, it is clear that the JBC does not fall within the scope of a tribunal, board,
or officer exercising judicial or quasi-judicial functions. In the process of selecting and
screening applicants, the JBC neither acted in any judicial or quasi-judicial capacity nor
assumed unto itself any performance of judicial or quasi-judicial prerogative. However,
since the formulation of guidelines and criteria, including the policy that the petitioner
now assails, is necessary and incidental to the exercise of the JBC's constitutional
mandate, a determination must be made on whether the JBC has acted with grave
abuse of discretion amounting to lack or excess of jurisdiction in issuing and enforcing
the said policy.

Besides, the Court can appropriately take cognizance of this case by virtue of the
Court's power of supervision over the JBC. Jurisprudence provides that the power of
supervision is the power of oversight, or the authority to see that subordinate officers
perform their duties. It ensures that the laws and the rules governing the conduct of a
government entity are observed and complied with. Supervising officials see to it that
rules are followed, but they themselves do not lay down such rules, nor do they have
the discretion to modify or replace them. If the rules are not observed, they may order
the work done or redone, but only to conform to such rules. They may not prescribe
their own manner of execution of the act. They have no discretion on this matter except
to see to it that the rules are followed.12

Following this definition, the supervisory authority of the Court over the JBC is to see to
it that the JBC complies with its own rules and procedures. Thus, when the policies of
the JBC are being attacked, then the Court, through its supervisory authority over the
JBC, has the duty to inquire about the matter and ensure that the JBC complies with its
own rules.

Two. The remedy of mandamus cannot be availed of by the petitioner in assailing JBC's

policy. The petitioner insisted that mandamus is proper because his right was violated
when he was not included in the list of candidates for the RTC courts he applied for. He
said that his non-inclusion in the list of candidates for these stations has caused him
direct injury.

It is essential to the issuance of a writ of mandamus that the applicant should have a
clear legal right to the thing demanded and it must be the imperative duty of the
respondent to perform the act required.13 The petitioner bears the burden to show that
there is such a clear legal right to the performance of the act, and a corresponding
compelling duty on the part of the respondent to perform the act. The remedy of
mandamus, as an extraordinary writ, lies only to compel an officer to perform a
ministerial duty, not a discretionary one.14 Clearly, the use of discretion and the
performance of a ministerial act are mutually exclusive.

The writ of mandamus does not issue to control or review the exercise of discretion or
to compel a course of conduct, which, it quickly seems to us, was what the petitioner
would have the JBC do in his favor. The function of the JBC to select and recommend
nominees for vacant judicial positions is discretionary, not ministerial. Moreso, the
petitioner cannot claim any legal right to be included in the list of nominees for judicial
vacancies. Possession of the constitutional and statutory qualifications for appointment

402 | P a g e
to the judiciary may not be used to legally demand that one's name be included in the
list of candidates for a judicial vacancy. One's inclusion in the list of the candidates
depends on the discretion of the JBC, thus: chanroblesvirtuallawlibrary

The fact that an individual possesses the constitutional and statutory qualifications for
appointment to the Judiciary does not create an entitlement or expectation that his or
her name be included in the list of candidates for a judicial vacancy. By submitting an
application or accepting a recommendation, one submits to the authority of the JBC to
subject the former to the search, screening, and selection process, and to use its
discretion in deciding whether or not one should be included in the list. Indeed,
assuming that if one has the legal right to be included in the list of candidates simply
because he or she possesses the constitutional and statutory qualifications, then the
application process would then be reduced to a mere mechanical function of the JBC;
and the search, screening, and selection process would not only be unnecessary, but
also improper. However, this is clearly not the constitutional intent. One's inclusion in
the list of candidates is subject to the discretion of the JBC over the selection
of nominees for a particular judicial post. Such candidate's inclusion is not,
therefore, a legally demandable right, but simply a privilege the conferment of which is
subject to the JBC's sound discretion.

Moreover, petitioner is essentially seeking a promotional appointment, that is, a

promotion from a first-level court to a second level court. There is no law, however,
that grants him the right to a promotion to second-level courts. 15 (Emphasis in
the original)
Clearly, to be included as an applicant to second-level judge is not properly compellable
by mandamus inasmuch as it involves the exercise of sound discretion by the JBC.

Three. The petition for declaratory relief is improper. "An action for declaratory relief
should be filed by a person interested under a deed, a will, a contract or other written
instrument, and whose rights are affected by a statute, an executive order, a regulation
or an ordinance. The relief sought under this remedy includes the interpretation and
determination of the validity of the written instrument and the judicial declaration of the
parties' rights or duties thereunder."16 "[T]he purpose of the action is to secure an
authoritative statement of the rights and obligations of the parties under a statute,
deed, contract, etc., for their guidance in its enforcement or compliance and not to
settle issues arising from its alleged breach."17

In this case, the petition for declaratory relief did not involve an unsound policy.
Rather, the petition specifically sought a judicial declaration that the petitioner has the
right to be included in the list of applicants although he failed to meet JBC's five-year
requirement policy. Again, the Court reiterates that no person possesses a legal right
under the Constitution to be included in the list of nominees for vacant judicial
positions. The opportunity of appointment to judicial office is a mere privilege, and not
a judicially enforceable right that may be properly claimed by any person. The inclusion
in the list of candidates, which is one of the incidents of such appointment, is not a
right either. Thus, the petitioner cannot claim any right that could have been affected
by the assailed policy.

Furthermore, the instant petition must necessarily fail because this Court does not have
original jurisdiction over a petition for declaratory relief even if only questions of law
are involved.18 The special civil action of declaratory relief falls under the exclusive

403 | P a g e
jurisdiction of the appropriate RTC pursuant to Section 1919 of Batas Pambansa Blg.
129, as amended by R.A.No. 7691.20

Therefore, by virtue of the Court's supervisory duty over the JBC and in the exercise of
its expanded judicial power, the Court assumes jurisdiction over the present petition.
But in any event, even if the Court will set aside procedural infirmities, the instant
petition should still be dismissed.
chanRoblesvirtualLawlibrary

Substantive Issues

As an offspring of the 1987 Constitution, the JBC is mandated to recommend

appointees to the judiciary and only those nominated by the JBC in a list officially
transmitted to the President may be appointed by the latter as justice or judge in the
judiciary. Thus, the JBC is burdened with a great responsibility that is imbued with
public interest as it determines the men and women who will sit on the judicial bench.
While the 1987 Constitution has provided the qualifications of members of the judiciary,
this does not preclude the JBC from having its own set of rules and procedures and
providing policies to effectively ensure its mandate.

The functions of searching, screening, and selecting are necessary and incidental to the
JBC's principal function of choosing and recommending nominees for vacancies in the
judiciary for appointment by the President. However, the Constitution did not lay down
in precise terms the process that the JBC shall follow in determining applicants'
qualifications. In carrying out its main function, the JBC has the authority to set the
standards/criteria in choosing its nominees for every vacancy in the judiciary, subject
only to the minimum qualifications required by the Constitution and law for every
position. The search for these long held qualities necessarily requires a degree of
flexibility in order to determine who is most fit among the applicants. Thus, the JBC has
sufficient but not unbridled license to act in performing its duties.

JBC's ultimate goal is to recommend nominees and not simply to fill up judicial
vacancies in order to promote an effective and efficient administration of justice. Given
this pragmatic situation, the JBC had to establish a set of uniform criteria in order to
ascertain whether an applicant meets the minimum constitutional qualifications and
possesses the qualities expected of him and his office. Thus, the adoption of the five-
year requirement policy applied by JBC to the petitioner's case is necessary and
incidental to the function conferred by the Constitution to the JBC.

Equal Protection

There is no question that JBC employs standards to have a rational basis to screen
applicants who cannot be all accommodated and appointed to a vacancy in the
judiciary, to determine who is best qualified among the applicants, and not to
discriminate against any particular individual or class.

The equal protection clause of the Constitution does not require the universal
application of the laws to all persons or things without distinction; what it requires is
simply equality among equals as determined according to a valid classification. Hence,
the Court has affirmed that if a law neither burdens a fundamental right nor targets a
suspect class, the classification stands as long as it bears a rational relationship to

404 | P a g e
some legitimate government end.21 ChanRoblesVirtualawlibrary

"The equal protection clause, therefore, does not preclude classification of individuals
who may be accorded different treatment under the law as long as the classification is
reasonable and not arbitrary."22 "The mere fact that the legislative classification may
result in actual inequality is not violative of the right to equal protection, for every
classification of persons or things for regulation by law produces inequality in some
degree, but the law is not thereby rendered invalid."23

That is the situation here. In issuing the assailed policy, the JBC merely exercised its
discretion in accordance with the constitutional requirement and its rules that a
member of the Judiciary must be of proven competence, integrity, probity and
independence.24"To ensure the fulfillment of these standards in every member of the
Judiciary, the JBC has been tasked to screen aspiring judges and justices, among
others, making certain that the nominees submitted to the President are all qualified
and suitably best for appointment. In this way, the appointing process itself is shielded
from the possibility of extending judicial appointment to the undeserving and mediocre
and, more importantly, to the ineligible or disqualified."25

Consideration of experience by JBC as one factor in choosing recommended appointees

does not constitute a violation of the equal protection clause. The JBC does not
discriminate when it employs number of years of service to screen and differentiate
applicants from the competition. The number of years of service provides a relevant
basis to determine proven competence which may be measured by experience, among
other factors. The difference in treatment between lower court judges who have served
at least five years and those who have served less than five years, on the other hand,
was rationalized by JBC as follows:chanroblesvirtuallawlibrary

Formulating policies which streamline the selection process falls squarely under the
purview of the JBC. No other constitutional body is bestowed with the mandate and
competency to set criteria for applicants that refer to the more general categories of
probity, integrity and independence.

The assailed criterion or consideration for promotion to a second-level court, which is

five years experience as judge of a first-level court, is a direct adherence to the
qualities prescribed by the Constitution. Placing a premium on many years of judicial
experience, the JBC is merely applying one of the stringent constitutional standards
requiring that a member of the judiciary be of "proven competence." In determining
competence, the JBC considers, among other qualifications, experience and
performance.

Based on the JBC's collective judgment, those who have been judges of first-level
courts for five (5) years are better qualified for promotion to second-level courts. It
deems length of experience as a judge as indicative of conversance with the law and
court procedure. Five years is considered as a sufficient span of time for one to acquire
professional skills for the next level court, declog the dockets, put in place improved
procedures and an efficient case management system, adjust to the work environment,
and gain extensive experience in the judicial process.

A five-year stint in the Judiciary can also provide evidence of the integrity,

probity, and independence of judges seeking promotion. To merit JBC's nomination

405 | P a g e
for their promotion, they must have had a "record of, and reputation for, honesty,
integrity, incorruptibility, irreproachable conduct, and fidelity to sound moral and ethical
standards." Likewise, their decisions must be reflective of the soundness of their
judgment, courage, rectitude, cold neutrality and strength of character.

Hence, for the purpose of determining whether judges are worthy of promotion to the
next level court, it would be premature or difficult to assess their merit if they have had
less than one year of service on the bench.26 (Citations omitted and emphasis in the
original)
At any rate, five years of service as a lower court judge is not the only factor that
determines the selection of candidates for RTC judge to be appointed by the President.
Persons with this qualification are neither automatically selected nor do they
automatically become nominees. The applicants are chosen based on an array of
factors and are evaluated based on their individual merits. Thus, it cannot be said that
the questioned policy was arbitrary, capricious, or made without any basis.

Clearly, the classification created by the challenged policy satisfies the rational basis
test. The foregoing shows that substantial distinctions do exist between lower court
judges with five year experience and those with less than five years of experience, like
the petitioner, and the classification enshrined in the assailed policy is reasonable and
relevant to its legitimate purpose. The Court, thus, rules that the questioned policy
does not infringe on the equal protection clause as it is based on reasonable
classification intended to gauge the proven competence of the applicants. Therefore,
the said policy is valid and constitutional.

Due Process

The petitioner averred that the assailed policy violates procedural due process for lack
of publication and non-submission to the University of the Philippines Law Center Office
of the National Administrative Register (ONAR). The petitioner said that the assailed
policy will affect all applying judges, thus, the said policy should have been published.

Contrary to the petitioner's contention, the assailed JBC policy need not be filed in the
ONAR because the publication requirement in the ONAR is confined to issuances of
administrative agencies under the Executive branch of the government.27 Since the JBC
is a body under the supervision of the Supreme Court,28 it is not covered by the
publication requirements of the Administrative Code.

Nevertheless, the assailed JBC policy requiring five years of service as judges of first-
level courts before they can qualify as applicants to second-level courts should have
been published. As a general rule, publication is indispensable in order that all statutes,
including administrative rules that are intended to enforce or implement existing laws,
attain binding force and effect. There are, however, several exceptions to the
requirement of publication, such as interpretative regulations and those merely internal
in nature, which regulate only the personnel of the administrative agency and not the
public. Neither is publication required of the so-called letters of instructions issued by
administrative superiors concerning the rules or guidelines to be followed by their
subordinates in the performance of their duties.29

Here, the assailed JBC policy does not fall within the administrative rules and

406 | P a g e
regulations exempted from the publication requirement. The assailed policy involves a
qualification standard by which the JBC shall determine proven competence of an
applicant. It is not an internal regulation, because if it were, it would regulate and affect
only the members of the JBC and their staff. Notably, the selection process involves a
call to lawyers who meet the qualifications in the Constitution and are willing to serve in
the Judiciary to apply to these vacant positions. Thus, it is but a natural consequence
thereof that potential applicants be informed of the requirements to the judicial
positions, so that they would be able to prepare for and comply with them.

The Court also noted the fact that in JBC-009, otherwise known as the Rules of the
Judicial and Bar Council, the JBC had put its criteria in writing and listed the guidelines
in determining competence, independence, integrity and probity. Section 1, Paragraph
1 of Rule 9 expressly provides that applicants for the Court of Appeals and
the Sandiganbayan, should, as a general rule, have at least five years of experience as
an RTC judge, thus: chanroblesvirtuallawlibrary

RULE 9 - SPECIAL GUIDELINES FOR NOMINATION TO A VACANCY IN THE COURT OF

APPEALS AND SANDIGANBAYAN

Section 1. Additional criteria for nomination to the Court of Appeals and the
Sandiganbayan. - In addition to the foregoing guidelines the Council should consider
the following in evaluating the merits of applicants for a vacancy in the Court of Appeals
and Sandiganbayan:

1. As a general rule, he must have at least five years of experience as a judge of

Regional Trial Court, except when he has in his favor outstanding credentials, as
evidenced by, inter alia, impressive scholastic or educational record and performance in
the Bar examinations, excellent reputation for honesty, integrity, probity and
independence of mind; at least very satisfactory performance rating for three (3) years
preceding the filing of his application for nomination; and excellent potentials for
appellate judgeship.

x x x x (Emphasis ours)
The express declaration of these guidelines in JBC-009, which have been duly published
on the website of the JBC and in a newspaper of general circulation suggests that the
JBC is aware that these are not mere internal rules, but are rules implementing the
Constitution that should be published. Thus, if the JBC were so-minded to add special
guidelines for determining competence of applicants for RTC judges, then it could and
should have amended its rules and published the same. This, the JBC did not do as
JBC-009 and its amendatory rule do not have special guidelines for applicants to the
RTC.

Moreover, jurisprudence has held that rules implementing a statute should be

published. Thus, by analogy, publication is also required for the five-year requirement
because it seeks to implement a constitutional provision requiring proven competence
from members of the judiciary.

Nonetheless, the JBC's failure to publish the assailed policy has not prejudiced the
petitioner's private interest. At the risk of being repetitive, the petitioner has no legal
right to be included in the list of nominees for judicial vacancies since the possession of
the constitutional and statutory qualifications for appointment to the Judiciary may not

407 | P a g e
be used to legally demand that one's name be included in the list of candidates for a
judicial vacancy. One's inclusion in the shortlist is strictly within the discretion of the
JBC.30

As to the issue that the JBC failed or refused to implement the completion of the
prejudicature program as a requirement for appointment or promotion in the judiciary
under R.A. No. 8557, this ground of the petition, being unsubstantiated, was
unfounded. Clearly, it cannot be said that JBC unlawfully neglects the performance of a
duty enjoined by law.

Finally, the petitioner argued but failed to establish that the assailed policy violates the
constitutional provision under social justice and human rights for equal opportunity of
employment. The OSG explained: chanroblesvirtuallawlibrary

[T]he questioned policy does not violate equality of employment opportunities. The
constitutional provision does not call for appointment to the Judiciary of all who might,
for any number of reasons, wish to apply. As with all professions, it is regulated by the
State. The office of a judge is no ordinary office. It is imbued with public interest and is
central in the administration of justice x x x. Applicants who meet the constitutional and
legal qualifications must vie and withstand the competition and rigorous screening and
selection process. They must submit themselves to the selection criteria, processes and
discretion of respondent JBC, which has the constitutional mandate of screening and
selecting candidates whose names will be in the list to be submitted to the President.
So long as a fair opportunity is available for all applicants who are evaluated on the
basis of their individual merits and abilities, the questioned policy cannot be struck
down as unconstitutional.31 (Citations omitted)
From the foregoing, it is apparent that the petitioner has not established a clear legal
right to justify the issuance of a preliminary injunction. The petitioner has merely filed
an application with the JBC for the position of RTC judge, and he has no clear legal right
to be nominated for that office nor to be selected and included in the list to be
submitted to the President which is subject to the discretion of the JBC. The JBC has
the power to determine who shall be recommended to the judicial post. To be included
in the list of applicants is a privilege as one can only be chosen under existing criteria
imposed by the JBC itself. As such, prospective applicants, including the petitioner,
cannot claim any demandable right to take part in it if they fail to meet these criteria.
Hence, in the absence of a clear legal right, the issuance of an injunctive writ is not
justified.

As the constitutional body granted with the power of searching for, screening, and
selecting applicants relative to recommending appointees to the Judiciary, the JBC has
the authority to determine how best to perform such constitutional mandate. Pursuant
to this authority, the JBC issues various policies setting forth the guidelines to be
observed in the evaluation of applicants, and formulates rules and guidelines in order to
ensure that the rules are updated to respond to existing circumstances. Its discretion is
freed from legislative, executive or judicial intervention to ensure that the JBC is
shielded from any outside pressure and improper influence. Limiting qualified applicants
in this case to those judges with five years of experience was an exercise of discretion
by the JBC. The potential applicants, however, should have been informed of the
requirements to the judicial positions, so that they could properly prepare for and
comply with them. Hence, unless there are good and compelling reasons to do so, the
Court will refrain from interfering with the exercise of JBC's powers, and will respect the

408 | P a g e
initiative and independence inherent in the latter. cralawred

WHEREFORE, premises considered, the petition is DISMISSED. The Court,

however, DIRECTS that the Judicial and Bar Council comply with the publication
requirement of (1) the assailed policy requiring five years of experience as judges of
first-level courts before they can qualify as applicant to the Regional Trial Court, and
(2) other special guidelines that the Judicial and Bar Council is or will be implementing.

SO ORDERED. chanroblesvirtuallawlibrary

409 | P a g e
 EN BANC

G.R. No. 209287               July 1, 2014

MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN;

JUDY M. TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-
CHAIRPERSON, PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP. LUZ
ILAGAN, GABRIELA WOMEN'S PARTY REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE,
BAY AN MUNA PARTY-LIST REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY
GENERAL OF BAYAN; MANUEL K. DAYRIT, CHAIRMAN, ANG KAPATIRAN PARTY; VENCER
MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN; VICTOR VILLANUEVA, CONVENOR,
YOUTH ACT NOW, Petitioners,
vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES;
PAQUITO N. OCHOA, JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD,
SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.

x-----------------------x

G.R. No. 209135

AUGUSTO L. SY JUCO JR., Ph.D., Petitioner,

vs.
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF DEPARTMENT OF
BUDGET AND MANAGEMENT; AND HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAP A
CITY AS THE SENATE PRESIDENT OF THE PHILIPPINES, Respondents.

x-----------------------x

G.R. No. 209136

MANUELITO R. LUNA, Petitioner,
vs.
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT; AND EXECUTIVE SECRETARY PAQUITO
OCHOA, IN HIS OFFICIAL CAPACITY AS ALTER EGO OF THE PRESIDENT, Respondents.

x-----------------------x

G.R. No. 209155

ATTY. JOSE MALV AR VILLEGAS, JR., Petitioner,

vs.
THE HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; AND THE
SECRETARY OF BUDGET AND MANAGEMENT FLORENCIO B. ABAD, Respondents.

x-----------------------x

G.R. No. 209164

410 | P a g e
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN
FROILAN M. BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES, Petitioners,
vs.
DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B.
ABAD, Respondents.

x-----------------------x

G.R. No. 209260

INTEGRATED BAR OF THE PHILIPPINES (IBP), Petitioner,

vs.
SECRETARY FLORENCIO B. ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT
(DBM), Respondent.

x-----------------------x

G.R. No. 209442

GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN MABANTE AND REV. JOSE L.
GONZALEZ, Petitioners,
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE PHILIPPINES,
REPRESENTED BY SENATE PRESIDENT FRANKLIN M. DRILON; THE HOUSE OF
REPRESENTATIVES, REPRESENTED BY SPEAKER FELICIANO BELMONTE, JR.; THE
EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.;
THE DEPARTMENT OF BUDGET AND MANAGEMENT, REPRESENTED BY SECRETARY
FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED BY SECRETARY
CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY ROSALIA V. DE
LEON, Respondents.

x-----------------------x

G.R. No. 209517

CONFEDERATION FOR UNITY, RECOGNITION AND ADV AN CEMENT OF GOVERNMENT

EMPLOYEES (COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO
DASMARINAS, JR.; ROSALINDA NARTATES, FOR HERSELF AND AS NATIONAL PRESIDENT
OF THE CONSOLIDATED UNION OF EMPLOYEES NATIONAL HOUSING AUTHORITY
(CUENHA); MANUEL BACLAGON, FOR HIMSELF AND AS PRESIDENT OF THE SOCIAL
WELFARE EMPLOYEES ASSOCIATION OF THE PHILIPPINES, DEPARTMENT OF SOCIAL
WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-DSWD CO); ANTONIA
PASCUAL, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE DEPARTMENT OF
AGRARIAN REFORM EMPLOYEES ASSOCIATION (DAREA); ALBERT MAGALANG, FOR
HIMSELF AND AS PRESIDENT OF THE ENVIRONMENT AND MANAGEMENT BUREAU
EMPLOYEES UNION (EMBEU); AND MARCIAL ARABA, FOR HIMSELF AND AS PRESIDENT
OF THE KAPISANAN PARA SA KAGALINGAN NG MGA KAW ANI NG MMDA
(KKKMMDA), Petitioners,
vs.
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES;
PAQUITO OCHOA, JR., EXECUTIVE SECRETARY; AND HON. FLORENCIO B. ABAD,
SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.

411 | P a g e
x-----------------------x

G.R. No. 209569

VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.

JIMENEZ, Petitioner,
vs.
PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B. ABAD, SECRETARY OF
THE DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.

DECISION

BERSAMIN, J.:

For resolution are the consolidated petitions assailing the constitutionality of the Disbursement
Acceleration Program(DAP), National Budget Circular (NBC) No. 541, and related issuances of the
Department of Budget and Management (DBM) implementing the DAP.

At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a provision of
the fundamental law that firmly ordains that "[n]o money shall be paid out of the Treasury except in
pursuance of an appropriation made by law." The tenor and context of the challenges posed by the
petitioners against the DAP indicate that the DAP contravened this provision by allowing the
Executive to allocate public money pooled from programmed and unprogrammed funds of its various
agencies in the guise of the President exercising his constitutional authority under Section 25(5) of
the 1987 Constitution to transfer funds out of savings to augment the appropriations of offices within
the Executive Branch of the Government. But the challenges are further complicated by the
interjection of allegations of transfer of funds to agencies or offices outside of the Executive.

Antecedents

What has precipitated the controversy?

On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of
the Philippines to reveal that some Senators, including himself, had been allotted an additional ₱50
Million each as "incentive" for voting in favor of the impeachment of Chief Justice Renato C. Corona.

Responding to Sen. Estrada’s revelation, Secretary Florencio Abad of the DBM issued a public
statement entitled Abad: Releases to Senators Part of Spending Acceleration Program,  explaining
1

that the funds released to the Senators had been part of the DAP, a program designed by the DBM
to ramp up spending to accelerate economic expansion. He clarified that the funds had been
released to the Senators based on their letters of request for funding; and that it was not the first
time that releases from the DAP had been made because the DAP had already been instituted in
2011 to ramp up spending after sluggish disbursements had caused the growth of the gross
domestic product (GDP) to slow down. He explained that the funds under the DAP were usually
taken from (1) unreleased appropriations under Personnel Services;  (2) unprogrammed funds; (3)
2

carry-over appropriations unreleased from the previous year; and (4) budgets for slow-moving items
or projects that had been realigned to support faster-disbursing projects.

The DBM soon came out to claim in its website  that the DAP releases had been sourced from
3

savings generated by the Government, and from unprogrammed funds; and that the savings had
been derived from (1) the pooling of unreleased appropriations, like unreleased Personnel

412 | P a g e
Services  appropriations that would lapse at the end of the year, unreleased appropriations of slow-
4

moving projects and discontinued projects per zero based budgeting findings;  and (2) the
5

withdrawal of unobligated allotments also for slow-moving programs and projects that had been
earlier released to the agencies of the National Government.

The DBM listed the following as the legal bases for the DAP’s use of savings,  namely: (1) Section
6

25(5), Article VI of the 1987 Constitution, which granted to the President the authority to augment an
item for his office in the general appropriations law; (2) Section 49 (Authority to Use Savings for
Certain Purposes) and Section 38 (Suspension of Expenditure Appropriations), Chapter 5, Book VI
of Executive Order (EO) No. 292 (Administrative Code of 1987); and (3) the General Appropriations
Acts (GAAs) of 2011, 2012 and 2013, particularly their provisions on the (a) use of savings; (b)
meanings of savings and augmentation; and (c) priority in the use of savings.

As for the use of unprogrammed funds under the DAP, the DBM cited as legal bases the special
provisions on unprogrammed fund contained in the GAAs of 2011, 2012 and 2013.

The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP to the
consciousness of the Nation for the first time, and made this present controversy inevitable. That the
issues against the DAP came at a time when the Nation was still seething in anger over
Congressional pork barrel – "an appropriation of government spending meant for localized projects
and secured solely or primarily to bring money to a representative’s district"  – excited the Nation as
7

heatedly as the pork barrel controversy.

Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP were
filed within days of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013; G.R. No.
209136 (Luna), on October 7, 2013; G.R. No. 209155 (Villegas),  on October 16, 2013; G.R. No.
8

209164 (PHILCONSA), on October 8, 2013; G.R. No. 209260 (IBP), on October 16, 2013; G.R. No.
209287 (Araullo), on October 17, 2013; G.R. No. 209442 (Belgica), on October 29, 2013; G.R. No.
209517 (COURAGE), on November6, 2013; and G.R. No. 209569 (VACC), on November 8, 2013.

In G.R. No. 209287 (Araullo), the petitioners brought to the Court’s attention NBC No. 541 (Adoption
of Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30,
2012), alleging that NBC No. 541, which was issued to implement the DAP, directed the withdrawal
of unobligated allotments as of June 30, 2012 of government agencies and offices with low levels of
obligations, both for continuing and current allotments.

In due time, the respondents filed their Consolidated Comment through the Office of the Solicitor
General (OSG).

The Court directed the holding of oral arguments on the significant issues raised and joined.

Issues

Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral
arguments were limited to the following, to wit:

Procedural Issue:

A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the
constitutionality and validity of the Disbursement Acceleration Program (DAP), National Budget
Circular (NBC) No. 541, and all other executive issuances allegedly implementing the DAP.

413 | P a g e
Subsumed in this issue are whether there is a controversy ripe for judicial determination, and the
standing of petitioners.

Substantive Issues:

B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: "No
money shall be paid out of the Treasury except in pursuance of an appropriation made by law."

C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly implementing
the DAP violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:

(a)They treat the unreleased appropriations and unobligated allotments withdrawn from
government agencies as "savings" as the term is used in Sec. 25(5), in relation to the
provisions of the GAAs of 2011, 2012 and 2013;

(b)They authorize the disbursement of funds for projects or programs not provided in the
GAAs for the Executive Department; and

(c)They "augment" discretionary lump sum appropriations in the GAAs.

D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and
balances, and (3) the principle of public accountability enshrined in the 1987 Constitution
considering that it authorizes the release of funds upon the request of legislators.

E. Whether or not factual and legal justification exists to issue a temporary restraining order to
restrain the implementation of the DAP, NBC No. 541, and all other executive issuances allegedly
implementing the DAP.

In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support
its argument regarding the President’s power to spend. During the oral arguments, the propriety of
releasing unprogrammed funds to support projects under the DAP was considerably discussed. The
petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) dwelled on unprogrammed
funds in their respective memoranda. Hence, an additional issue for the oral arguments is stated as
follows:

F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.

During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit a list
of savings brought under the DAP that had been sourced from (a) completed programs; (b)
discontinued or abandoned programs; (c) unpaid appropriations for compensation; (d) a certified
copy of the President’s directive dated June 27, 2012 referred to in NBC No. 541; and (e) all
circulars or orders issued in relation to the DAP.
9

In compliance, the OSG submitted several documents, as follows:

(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus
Authority to Consolidate Savings/Unutilized Balances and their Realignment); 10

(2) Circulars and orders, which the respondents identified as related to the DAP, namely:

414 | P a g e
 a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY
2011);

b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for
FY 2012);

c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure –
Withdrawal of Agencies’ Unobligated Allotments as of June 30, 2012);

d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY
2013);

e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);

f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines on
the Submission of Quarterly Accountability Reports on Appropriations, Allotments,
Obligations and Disbursements);

g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release
System in the Government).

(3) A breakdown of the sources of savings, including savings from discontinued projects and
unpaid appropriations for compensation from 2011 to 2013

On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014 directing
the respondents to submit the documents not yet submitted in compliance with the directives of the
Court or its Members, submitted several evidence packets to aid the Court in understanding the
factual bases of the DAP, to wit:

(1) First Evidence Packet  – containing seven memoranda issued by the DBM through Sec.
11

Abad, inclusive of annexes, listing in detail the 116 DAP identified projects approved and
duly signed by the President, as follows:

a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed
Disbursement Acceleration Program (Projects and Sources of Funds);

b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and its Realignment);

c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment);

d. Memorandum for the President dated September 4, 2012 (Release of funds for
other priority projects and expenditures of the Government);

e. Memorandum for the President dated December 19, 2012 (Proposed Priority
Projects and Expenditures of the Government);

415 | P a g e
 f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment to Fund the
Quarterly Disbursement Acceleration Program); and

g. Memorandum for the President dated September 25, 2013 (Funding for the Task
Force Pablo Rehabilitation Plan).

(2) Second Evidence Packet  – consisting of 15 applications of the DAP, with their
12

corresponding Special Allotment Release Orders (SAROs) and appropriation covers;

(3) Third Evidence Packet  – containing a list and descriptions of 12 projects under the DAP;
13

(4) Fourth Evidence Packet  – identifying the DAP-related portions of the Annual Financial
14

Report (AFR) of the Commission on Audit for 2011 and 2012;

(5) Fifth Evidence Packet  – containing a letter of Department of Transportation and

15

Communications(DOTC) Sec. Joseph Abaya addressed to Sec. Abad recommending the

withdrawal of funds from his agency, inclusive of annexes; and

(6) Sixth Evidence Packet  – a print-out of the Solicitor General’s visual presentation for the
16

January 28, 2014 oral arguments.

On February 5, 2014,  the OSG forwarded the Seventh Evidence Packet,  which listed the sources
17 18

of funds brought under the DAP, the uses of such funds per project or activity pursuant to DAP, and
the legal bases thereof.

On February 14, 2014, the OSG submitted another set of documents in further compliance with the
Resolution dated January 28, 2014, viz:

(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect that the
revenue collections exceeded the original revenue targets for the years 2011, 2012 and 2013,
including collections arising from sources not considered in the original revenue targets, which
certifications were required for the release of the unprogrammed funds as provided in Special
Provision No. 1 of Article XLV, Article XVI, and Article XLV of the 2011, 2012 and 2013 GAAs; and
(2) A report on releases of savings of the Executive Department for the use of the Constitutional
Commissions and other branches of the Government, as well as the fund releases to the Senate and
the Commission on Elections (COMELEC).

RULING

I.

Procedural Issue:

a) The petitions under Rule 65 are proper remedies

All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the
issuance of writs of preliminary prohibitory injunction or temporary restraining orders. More
specifically, the nature of the petitions is individually set forth hereunder, to wit:

416 | P a g e
 G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus

G.R. No. 209136 (Luna) Certiorariand Prohibition

G.R. No. 209155 (Villegas) Certiorariand Prohibition

G.R. No. 209164 (PHILCONSA) Certiorariand Prohibition

G.R. No. 209260 (IBP) Prohibition

G.R. No. 209287 (Araullo) Certiorariand Prohibition

G.R. No. 209442 (Belgica) Certiorari

G.R. No. 209517 (COURAGE) Certiorari and Prohibition

G.R. No. 209569 (VACC) Certiorari and Prohibition

The respondents submit that there is no actual controversy that is ripe for adjudication in the
absence of adverse claims between the parties;  that the petitioners lacked legal standing to sue
19

because no allegations were made to the effect that they had suffered any injury as a result of the
adoption of the DAP and issuance of NBC No. 541; that their being taxpayers did not immediately
confer upon the petitioners the legal standing to sue considering that the adoption and
implementation of the DAP and the issuance of NBC No. 541 were not in the exercise of the taxing
or spending power of Congress;  and that even if the petitioners had suffered injury, there were
20

plain, speedy and adequate remedies in the ordinary course of law available to them, like assailing
the regularity of the DAP and related issuances before the Commission on Audit (COA) or in the trial
courts.21

The respondents aver that the special civil actions of certiorari and prohibition are not proper actions
for directly assailing the constitutionality and validity of the DAP, NBC No. 541, and the other
executive issuances implementing the DAP. 22

In their memorandum, the respondents further contend that there is no authorized proceeding under
the Constitution and the Rules of Court for questioning the validity of any law unless there is an
actual case or controversy the resolution of which requires the determination of the constitutional
question; that the jurisdiction of the Court is largely appellate; that for a court of law to pass upon the
constitutionality of a law or any act of the Government when there is no case or controversy is for
that court to set itself up as a reviewer of the acts of Congress and of the President in violation of the
principle of separation of powers; and that, in the absence of a pending case or controversy
involving the DAP and NBC No. 541, any decision herein could amount to a mere advisory opinion
that no court can validly render. 23

The respondents argue that it is the application of the DAP to actual situations that the petitioners
can question either in the trial courts or in the COA; that if the petitioners are dissatisfied with the
ruling either of the trial courts or of the COA, they can appeal the decision of the trial courts by
petition for review on certiorari, or assail the decision or final order of the COA by special civil action
for certiorari under Rule 64 of the Rules of Court. 24

417 | P a g e
The respondents’ arguments and submissions on the procedural issue are bereft of merit.

Section 1, Article VIII of the 1987 Constitution expressly provides:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may
be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

Thus, the Constitution vests judicial power in the Court and in such lower courts as may be
established by law. In creating a lower court, Congress concomitantly determines the jurisdiction of
that court, and that court, upon its creation, becomes by operation of the Constitution one of the
repositories of judicial power.  However, only the Court is a constitutionally created court, the rest
25

being created by Congress in its exercise of the legislative power.

The Constitution states that judicial power includes the duty of the courts of justice not only "to settle
actual controversies involving rights which are legally demandable and enforceable" but also "to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government." It has thereby expanded
the concept of judicial power, which up to then was confined to its traditional ambit of settling actual
controversies involving rights that were legally demandable and enforceable.

The background and rationale of the expansion of judicial power under the 1987 Constitution were
laid out during the deliberations of the 1986 Constitutional Commission by Commissioner Roberto R.
Concepcion (a former Chief Justice of the Philippines) in his sponsorship of the proposed provisions
on the Judiciary, where he said:–

The Supreme Court, like all other courts, has one main function: to settle actual controversies
involving conflicts of rights which are demandable and enforceable. There are rights which are
guaranteed by law but cannot be enforced by a judicial party. In a decided case, a husband
complained that his wife was unwilling to perform her duties as a wife. The Court said: "We can tell
your wife what her duties as such are and that she is bound to comply with them, but we cannot
force her physically to discharge her main marital duty to her husband. There are some rights
guaranteed by law, but they are so personal that to enforce them by actual compulsion would be
highly derogatory to human dignity." This is why the first part of the second paragraph of Section 1
provides that: Judicial power includes the duty of courts to settle actual controversies involving rights
which are legally demandable or enforceable…

The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential
system of government, the Supreme Court has, also, another important function. The powers of
government are generally considered divided into three branches: the Legislative, the Executive and
the Judiciary. Each one is supreme within its own sphere and independent of the others. Because of
that supremacy power to determine whether a given law is valid or not is vested in courts of justice.

Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on the
question whether or not a branch of government or any of its officials has acted without jurisdiction
or in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to

418 | P a g e
excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
judgmenton matters of this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter
evade the duty to settle matters of this nature, by claiming that such matters constitute a political
question. (Bold emphasis supplied) 26

Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of

judicial power in the following manner:–

MR. NOLLEDO. x x x

The second paragraph of Section 1 states: "Judicial power includes the duty of courts of justice to
settle actual controversies…" The term "actual controversies" according to the Commissioner should
refer to questions which are political in nature and, therefore, the courts should not refuse to decide
those political questions. But do I understand it right that this is restrictive or only an example? I
know there are cases which are not actual yet the court can assume jurisdiction. An example is the
petition for declaratory relief.

May I ask the Commissioner’s opinion about that?

MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.

MR. NOLLEDO. The Gentleman used the term "judicial power" but judicial power is not vested in the
Supreme Court alone but also in other lower courts as may be created by law.

MR. CONCEPCION. Yes.

MR. NOLLEDO. And so, is this only an example?

MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with
jurisdictional questions. But there is a difference.

MR. NOLLEDO. Because of the expression "judicial power"?

MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a
question as to whether the government had authority or had abused its authority to the extent of
lacking jurisdiction or excess of jurisdiction, that is not a political question. Therefore, the court has
the duty to decide.27

Our previous Constitutions equally recognized the extent of the power of judicial review and the
great responsibility of the Judiciary in maintaining the allocation of powers among the three great
branches of Government. Speaking for the Court in Angara v. Electoral Commission,  Justice Jose
28

P. Laurel intoned:

x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are
apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is
the only constitutional organ which can be called upon to determine the proper allocation of powers
between the several department and among the integral or constituent units thereof.

xxxx

419 | P a g e
The Constitution is a definition of the powers of government. Who is to determine the nature, scope
and extent of such powers? The Constitution itself has provided for the instrumentality of the
judiciary as the rational way. And when the judiciary mediates to allocate constitutional boundaries, it
does not assert any superiority over the other department; it does not in reality nullify or invalidate an
act of the legislature, but only asserts the solemn and sacred obligation assigned to it by the
Constitution to determine conflicting claims of authority under the Constitution and to establish for
the parties in an actual controversy the rights which that instrument secures and guarantees to them.
This is in truth all that is involved in what is termed "judicial supremacy" which properly is the power
of judicial review under the Constitution. x x x
29

What are the remedies by which the grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government may be determined under
the Constitution?

The present Rules of Court uses two special civil actions for determining and correcting grave abuse
of discretion amounting to lack or excess of jurisdiction. These are the special civil actions for
certiorari and prohibition, and both are governed by Rule 65. A similar remedy of certiorari exists
under Rule 64, but the remedy is expressly applicable only to the judgments and final orders or
resolutions of the Commission on Elections and the Commission on Audit.

The ordinary nature and function of the writ of certiorari in our present system are aptly explained in
Delos Santos v. Metropolitan Bank and Trust Company: 30

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out
of Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the
record of a cause pending before them, so as to give the party more sure and speedy justice, for the
writ would enable the superior court to determine from an inspection of the record whether the
inferior court’s judgment was rendered without authority. The errors were of such a nature that, if
allowed to stand, they would result in a substantial injury to the petitioner to whom no other remedy
was available. If the inferior court acted without authority, the record was then revised and corrected
in matters of law. The writ of certiorari was limited to cases in which the inferior court was said to be
exceeding its jurisdiction or was not proceeding according to essential requirements of law and
would lie only to review judicial or quasi-judicial acts.

The concept of the remedy of certiorari in our judicial system remains much the same as it has been
in the common law. In this jurisdiction, however, the exercise of the power to issue the writ of
certiorari is largely regulated by laying down the instances or situations in the Rules of Court in
which a superior court may issue the writ of certiorari to an inferior court or officer. Section 1, Rule
65 of the Rules of Court compellingly provides the requirements for that purpose, viz:

xxxx

The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse
of discretion is not enough to warrant the issuance of the writ. The abuse of discretion must be
grave, which means either that the judicial or quasi-judicial power was exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or
board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in
contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial
powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction. 31

420 | P a g e
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be
distinguished from prohibition by the fact that it is a corrective remedy used for the re-examination of
some action of an inferior tribunal, and is directed to the cause or proceeding in the lower court and
not to the court itself, while prohibition is a preventative remedy issuing to restrain future action, and
is directed to the court itself.  The Court expounded on the nature and function of the writ of
32

prohibition in Holy Spirit Homeowners Association, Inc. v. Defensor: 33

A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a
quasi-legislative function. Prohibition is an extraordinary writ directed against any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, ordering said entity or person to desist from further proceedings when said proceedings
are without or in excess of said entity’s or person’s jurisdiction, or are accompanied with grave
abuse of discretion, and there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law. Prohibition lies against judicial or ministerial functions, but not against
legislative or quasi-legislative functions. Generally, the purpose of a writ of prohibition is to keep a
lower court within the limits of its jurisdiction in order to maintain the administration of justice in
orderly channels. Prohibition is the proper remedy to afford relief against usurpation of jurisdiction or
power by an inferior court, or when, in the exercise of jurisdiction in handling matters clearly within its
cognizance the inferior court transgresses the bounds prescribed to it by the law, or where there is
no adequate remedy available in the ordinary course of law by which such relief can be obtained.
Where the principal relief sought is to invalidate an IRR, petitioners’ remedy is an ordinary action for
its nullification, an action which properly falls under the jurisdiction of the Regional Trial Court. In any
case, petitioners’ allegation that "respondents are performing or threatening to perform functions
without or in excess of their jurisdiction" may appropriately be enjoined by the trial court through a
writ of injunction or a temporary restraining order.

With respect to the Court, however, the remedies of certiorari and prohibition are necessarily
broader in scope and reach, and the writ of certiorari or prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions but also to set right, undo and restrain any act of grave abuse of
discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, even if the latter does not exercise judicial, quasi-judicial or ministerial functions. This
application is expressly authorized by the text of the second paragraph of Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues
and to review and/or prohibit or nullify the acts of legislative and executive officials.
34

Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave
abuse of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, the Court is not at all precluded from making the inquiry provided the challenge was
properly brought by interested or affected parties. The Court has been thereby entrusted expressly
or by necessary implication with both the duty and the obligation of determining, in appropriate
cases, the validity of any assailed legislative or executive action. This entrustment is consistent with
the republican system of checks and balances. 35

Following our recent dispositions concerning the congressional pork barrel, the Court has become
more alert to discharge its constitutional duty. We will not now refrain from exercising our expanded
judicial power in order to review and determine, with authority, the limitations on the Chief
Executive’s spending power.

421 | P a g e
b) Requisites for the exercise of the
power of judicial review were
complied with

The requisites for the exercise of the power of judicial review are the following, namely: (1) there
must bean actual case or justiciable controversy before the Court; (2) the question before the Court
must be ripe for adjudication; (3) the person challenging the act must be a proper party; and (4) the
issue of constitutionality must be raised at the earliest opportunity and must be the very litis mota of
the case.36

The first requisite demands that there be an actual case calling for the exercise of judicial power by
the Court.  An actual case or controversy, in the words of Belgica v. Executive Secretary Ochoa:
37 38

x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible
of judicial resolution as distinguished from a hypothetical or abstract difference or dispute. In other
words, "[t]here must be a contrariety of legal rights that can be interpreted and enforced on the basis
of existing law and jurisprudence." Related to the requirement of an actual case or controversy is the
requirement of "ripeness," meaning that the questions raised for constitutional scrutiny are already
ripe for adjudication. "A question is ripe for adjudication when the act being challenged has had a
direct adverse effect on the individual challenging it. It is a prerequisite that something had then
been accomplished or performed by either branch before a court may come into the picture, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action." "Withal, courts will decline to pass upon constitutional issues through advisory
opinions, bereft as they are of authority to resolve hypothetical or moot questions."

An actual and justiciable controversy exists in these consolidated cases. The incompatibility of the
perspectives of the parties on the constitutionality of the DAP and its relevant issuances satisfy the
requirement for a conflict between legal rights. The issues being raised herein meet the requisite
ripeness considering that the challenged executive acts were already being implemented by the
DBM, and there are averments by the petitioners that such implementation was repugnant to the
letter and spirit of the Constitution. Moreover, the implementation of the DAP entailed the allocation
and expenditure of huge sums of public funds. The fact that public funds have been allocated,
disbursed or utilized by reason or on account of such challenged executive acts gave rise, therefore,
to an actual controversy that is ripe for adjudication by the Court.

It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP as a
program had been meanwhile discontinued because it had fully served its purpose, saying: "In
conclusion, Your Honors, may I inform the Court that because the DAP has already fully served its
purpose, the Administration’s economic managers have recommended its termination to the
President. x x x."
39

The Solicitor General then quickly confirmed the termination of the DAP as a program, and urged
that its termination had already mooted the challenges to the DAP’s constitutionality, viz:

DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its
constitutionality. Any constitutional challenge should no longer be at the level of the program, which
is now extinct, but at the level of its prior applications or the specific disbursements under the now
defunct policy. We challenge the petitioners to pick and choose which among the 116 DAP projects
they wish to nullify, the full details we will have provided by February 5. We urge this Court to be
cautious in limiting the constitutional authority of the President and the Legislature to respond to the
dynamic needs of the country and the evolving demands of governance, lest we end up straight

422 | P a g e
jacketing our elected representatives in ways not consistent with our constitutional structure and
democratic principles. 40

A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value. 41

The Court cannot agree that the termination of the DAP as a program was a supervening event that
effectively mooted these consolidated cases. Verily, the Court had in the past exercised its power of
judicial review despite the cases being rendered moot and academic by supervening events, like: (1)
when there was a grave violation of the Constitution; (2) when the case involved a situation of
exceptional character and was of paramount public interest; (3) when the constitutional issue raised
required the formulation of controlling principles to guide the Bench, the Bar and the public; and (4)
when the case was capable of repetition yet evading review. 42

Assuming that the petitioners’ several submissions against the DAP were ultimately sustained by the
Court here, these cases would definitely come under all the exceptions. Hence, the Court should not
abstain from exercising its power of judicial review.

Did the petitioners have the legal standing to sue?

Legal standing, as a requisite for the exercise of judicial review, refers to "a right of appearance in a
court of justice on a given question."  The concept of legal standing, or locus standi, was particularly
43

discussed in De Castro v. Judicial and Bar Council,  where the Court said:
44

In public or constitutional litigations, the Court is often burdened with the determination of the locus
standi of the petitioners due to the ever-present need to regulate the invocation of the intervention of
the Court to correct any official action or policy in order to avoid obstructing the efficient functioning
of public officials and offices involved in public service. It is required, therefore, that the petitioner
must have a personal stake in the outcome of the controversy, for, as indicated in Agan, Jr. v.
Philippine International Air Terminals Co., Inc.:

The question on legal standing is whether such parties have "alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination of difficult constitutional
questions." Accordingly, it has been held that the interest of a person assailing the constitutionality of
a statute must be direct and personal. He must be able to show, not only that the law or any
government act is invalid, but also that he sustained or is in imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite
way. It must appear that the person complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.

It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for
determining whether a petitioner in a public action had locus standi. There, the Court held that the
person who would assail the validity of a statute must have "a personal and substantial interest in
the case such that he has sustained, or will sustain direct injury as a result." Vera was followed in
Custodio v. President of the Senate, Manila Race Horse Trainers’ Association v. De la Fuente, Anti-
Chinese League of the Philippines v. Felix, and Pascual v. Secretary of Public Works.

Yet, the Court has also held that the requirement of locus standi, being a mere procedural
technicality, can be waived by the Court in the exercise of its discretion. For instance, in 1949, in
Araneta v. Dinglasan, the Court liberalized the approach when the cases had "transcendental

423 | P a g e
importance." Some notable controversies whose petitioners did not pass the direct injury test were
allowed to be treated in the same way as in Araneta v. Dinglasan.

In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues
raised by the petition due to their "far reaching implications," even if the petitioner had no personality
to file the suit. The liberal approach of Aquino v. Commission on Elections has been adopted in
several notable cases, permitting ordinary citizens, legislators, and civic organizations to bring their
suits involving the constitutionality or validity of laws, regulations, and rulings.

However, the assertion of a public right as a predicate for challenging a supposedly illegal or
unconstitutional executive or legislative action rests on the theory that the petitioner represents the
public in general. Although such petitioner may not be as adversely affected by the action
complained against as are others, it is enough that he sufficiently demonstrates in his petition that he
is entitled to protection or relief from the Court in the vindication of a public right.

Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus
standi. That is not surprising, for even if the issue may appear to concern only the public in general,
such capacities nonetheless equip the petitioner with adequate interest to sue. In David v.
Macapagal-Arroyo, the Court aptly explains why:

Case law in most jurisdiction snow allows both "citizen" and "taxpayer" standing in public actions.
The distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a
taxpayer’s suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff
is affected by the expenditure of public funds, while in the latter, he is but the mere instrument of the
public concern. As held by the New York Supreme Court in People ex rel Case v. Collins: "In matter
of mere public right, however…the people are the real parties…It is at least the right, if not the duty,
of every citizen to interfere and see that a public offence be properly pursued and punished, and that
a public grievance be remedied." With respect to taxpayer’s suits, Terr v. Jordan held that "the right
of a citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds
to his injury cannot be denied." 45

The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc.  that 46

"[s]tanding is a peculiar concept in constitutional law because in some cases, suits are not brought
by parties who have been personally injured by the operation of a law or any other government act
but by concerned citizens, taxpayers or voters who actually sue in the public interest."

Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their
capacities as taxpayers who, by averring that the issuance and implementation of the DAP and its
relevant issuances involved the illegal disbursements of public funds, have an interest in preventing
the further dissipation of public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No.
209442 (Belgica) also assert their right as citizens to sue for the enforcement and observance of the
constitutional limitations on the political branches of the Government. 47

On its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to
bring cases upon constitutional issues.  Luna, the petitioner in G.R. No. 209136, cites his additional
48

capacity as a lawyer. The IBP, the petitioner in G.R. No. 209260, stands by "its avowed duty to work
for the rule of law and of paramount importance of the question in this action, not to mention its civic
duty as the official association of all lawyers in this country." 49

Under their respective circumstances, each of the petitioners has established sufficient interest in
the outcome of the controversy as to confer locus standi on each of them.

424 | P a g e
In addition, considering that the issues center on the extent of the power of the Chief Executive to
disburse and allocate public funds, whether appropriated by Congress or not, these cases pose
issues that are of transcendental importance to the entire Nation, the petitioners included. As such,
the determination of such important issues call for the Court’s exercise of its broad and wise
discretion "to waive the requirement and so remove the impediment to its addressing and resolving
the serious constitutional questions raised." 50

II.
Substantive Issues

1.
Overview of the Budget System

An understanding of the Budget System of the Philippines will aid the Court in properly appreciating
and justly resolving the substantive issues.

a) Origin of the Budget System

The term "budget" originated from the Middle English word bouget that had derived from the Latin
word bulga (which means bag or purse). 51

In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined "budget" as the
financial program of the National Government for a designated fiscal year, consisting of the
statements of estimated receipts and expenditures for the fiscal year for which it was intended to be
effective based on the results of operations during the preceding fiscal years. The term was given a
different meaning under Republic Act No. 992 (Revised Budget Act) by describing the budget as the
delineation of the services and products, or benefits that would accrue to the public together with the
estimated unit cost of each type of service, product or benefit.  For a forthright definition, budget
52

should simply be identified as the financial plan of the Government,  or "the master plan of
53

government." 54

The concept of budgeting has not been the product of recent economies. In reality, financing public
goals and activities was an idea that existed from the creation of the State.  To protect the people,
55

the territory and sovereignty of the State, its government must perform vital functions that required
public expenditures. At the beginning, enormous public expenditures were spent for war activities,
preservation of peace and order, security, administration of justice, religion, and supply of limited
goods and services.  In order to finance those expenditures, the State raised revenues through
56

taxes and impositions.  Thus, budgeting became necessary to allocate public revenues for specific
57

government functions.  The State’s budgeting mechanism eventually developed through the years
58

with the growing functions of its government and changes in its market economy.

The Philippine Budget System has been greatly influenced by western public financial institutions.
This is because of the country’s past as a colony successively of Spain and the United States for a
long period of time. Many aspects of the country’s public fiscal administration, including its Budget
System, have been naturally patterned after the practices and experiences of the western public
financial institutions. At any rate, the Philippine Budget System is presently guided by two principal
objectives that are vital to the development of a progressive democratic government, namely: (1) to
carry on all government activities under a comprehensive fiscal plan developed, authorized and
executed in accordance with the Constitution, prevailing statutes and the principles of sound public
management; and (2) to provide for the periodic review and disclosure of the budgetary status of the
Government in such detail so that persons entrusted by law with the responsibility as well as the

425 | P a g e
enlightened citizenry can determine the adequacy of the budget actions taken, authorized or
proposed, as well as the true financial position of the Government.
59

b) Evolution of the Philippine Budget System

The budget process in the Philippines evolved from the early years of the American Regime up to
the passage of the Jones Law in 1916. A Budget Office was created within the Department of
Finance by the Jones Law to discharge the budgeting function, and was given the responsibility to
assist in the preparation of an executive budget for submission to the Philippine Legislature.
60

As early as under the 1935 Constitution, a budget policy and a budget procedure were established,
and subsequently strengthened through the enactment of laws and executive acts.  EO No. 25,
61

issued by President Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve
as the agency that carried out the President’s responsibility of preparing the budget.  CA No. 246,
62

the first budget law, went into effect on January 1, 1938 and established the Philippine budget
process. The law also provided a line-item budget as the framework of the Government’s budgeting
system,  with emphasis on the observance of a "balanced budget" to tie up proposed expenditures
63

with existing revenues.

CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA)
No. 992,whereby Congress introduced performance-budgeting to give importance to functions,
projects and activities in terms of expected results.  RA No. 992 also enhanced the role of the
64

Budget Commission as the fiscal arm of the Government. 65

The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that
culminated in the enactment of PD No. 1177 that President Marcos issued on July30, 1977, and of
PD No. 1405, issued on June 11, 1978. The latter decree converted the Budget Commission into the
Ministry of Budget, and gave its head the rank of a Cabinet member.

The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO
No. 711. The OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989.

c) The Philippine Budget Cycle 66

Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation; (2)
Budget Legislation; (3) Budget Execution; and (4) Accountability. Each phase is distinctly separate
from the others but they overlap in the implementation of the budget during the budget year.

c.1.Budget Preparation 67

The budget preparation phase is commenced through the issuance of a Budget Call by the DBM.
The Budget Call contains budget parameters earlier set by the Development Budget Coordination
Committee (DBCC) as well as policy guidelines and procedures to aid government agencies in the
preparation and submission of their budget proposals. The Budget Call is of two kinds, namely: (1) a
National Budget Call, which is addressed to all agencies, including state universities and colleges;
and (2) a Corporate Budget Call, which is addressed to all government-owned and -controlled
corporations (GOCCs) and government financial institutions (GFIs).

Following the issuance of the Budget Call, the various departments and agencies submit their
respective Agency Budget Proposals to the DBM. To boost citizen participation, the current
administration has tasked the various departments and agencies to partner with civil society

426 | P a g e
organizations and other citizen-stakeholders in the preparation of the Agency Budget Proposals,
which proposals are then presented before a technical panel of the DBM in scheduled budget
hearings wherein the various departments and agencies are given the opportunity to defend their
budget proposals. DBM bureaus thereafter review the Agency Budget Proposals and come up with
recommendations for the Executive Review Board, comprised by the DBM Secretary and the DBM’s
senior officials. The discussions of the Executive Review Board cover the prioritization of programs
and their corresponding support vis-à-vis the priority agenda of the National Government, and their
implementation.

The DBM next consolidates the recommended agency budgets into the National Expenditure
Program (NEP)and a Budget of Expenditures and Sources of Financing (BESF). The NEP provides
the details of spending for each department and agency by program, activity or project (PAP), and is
submitted in the form of a proposed GAA. The Details of Selected Programs and Projects is the
more detailed disaggregation of key PAPs in the NEP, especially those in line with the National
Government’s development plan. The Staffing Summary provides the staffing complement of each
department and agency, including the number of positions and amounts allocated.

The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the
Cabinet for further refinements or reprioritization. Once the NEP and the BESF are approved by the
President and the Cabinet, the DBM prepares the budget documents for submission to Congress.
The budget documents consist of: (1) the President’s Budget Message, through which the President
explains the policy framework and budget priorities; (2) the BESF, mandated by Section 22, Article
VII of the Constitution,  which contains the macroeconomic assumptions, public sector context,
68

breakdown of the expenditures and funding sources for the fiscal year and the two previous years;
and (3) the NEP.

Public or government expenditures are generally classified into two categories, specifically: (1)
capital expenditures or outlays; and (2) current operating expenditures. Capital expenditures are the
expenses whose usefulness lasts for more than one year, and which add to the assets of the
Government, including investments in the capital of government-owned or controlled corporations
and their subsidiaries.  Current operating expenditures are the purchases of goods and services in
69

current consumption the benefit of which does not extend beyond the fiscal year.  The two
70

components of current expenditures are those for personal services (PS), and those for
maintenance and other operating expenses(MOOE).

Public expenditures are also broadly grouped according to their functions into: (1) economic
development expenditures (i.e., expenditures on agriculture and natural resources, transportation
and communications, commerce and industry, and other economic development efforts);  (2) social
71

services or social development expenditures (i.e., government outlay on education, public health and
medicare, labor and welfare and others);  (3) general government or general public services
72

expenditures (i.e., expenditures for the general government, legislative services, the administration
of justice, and for pensions and gratuities);  (4) national defense expenditures (i.e., sub-divided into
73

national security expenditures and expenditures for the maintenance of peace and order);  and (5)
74

public debt.75

Public expenditures may further be classified according to the nature of funds, i.e., general fund,
special fund or bond fund. 76

On the other hand, public revenues complement public expenditures and cover all income or
receipts of the government treasury used to support government expenditures. 77

427 | P a g e
 Classical economist Adam Smith categorized public revenues based on two principal sources,
stating: "The revenue which must defray…the necessary expenses of government may be drawn
either, first from some fund which peculiarly belongs to the sovereign or commonwealth, and which
is independent of the revenue of the people, or, secondly, from the revenue of the people."  Adam78

Smith’s classification relied on the two aspects of the nature of the State: first, the State as a juristic
person with an artificial personality, and, second, the State as a sovereign or entity possessing
supreme power. Under the first aspect, the State could hold property and engage in trade, thereby
deriving what is called its quasi private income or revenues, and which "peculiarly belonged to the
sovereign." Under the second aspect, the State could collect by imposing charges on the revenues
of its subjects in the form of taxes. 79

In the Philippines, public revenues are generally derived from the following sources, to wit: (1) tax
revenues(i.e., compulsory contributions to finance government activities); 80 (2) capital
revenues(i.e., proceeds from sales of fixed capital assets or scrap thereof and public domain, and
gains on such sales like sale of public lands, buildings and other structures, equipment, and other
properties recorded as fixed assets); 81 (3) grants(i.e., voluntary contributions and aids given to the
Government for its operation on specific purposes in the form of money and/or materials, and do not
require any monetary commitment on the part of the recipient);  (4) extraordinary income(i.e.,
82

repayment of loans and advances made by government corporations and local governments and the
receipts and shares in income of the Banko Sentral ng Pilipinas, and other receipts);  and (5) public
83

borrowings(i.e., proceeds of repayable obligations generally with interest from domestic and foreign
creditors of the Government in general, including the National Government and its political
subdivisions). 84

More specifically, public revenues are classified as follows: 85

General Income Specific Income

1. Subsidy Income from National 1. Income Taxes

Government
2. Property Taxes
2. Subsidy from Central Office
3. Taxes on Goods and Services
3. Subsidy from Regional
Office/Staff Bureaus 4. Taxes on International Trade and
Transactions
4. Income from Government
Services 5. Other Taxes 6.Fines and Penalties-Tax Revenue

5. Income from Government 7. Other Specific Income

Business Operations

6. Sales Revenue

7. Rent Income

8. Insurance Income

9. Dividend Income

10. Interest Income

11. Sale of Confiscated Goods and

428 | P a g e
 Properties

12. Foreign Exchange (FOREX)

Gains

13. Miscellaneous Operating and

Service Income

14. Fines and Penalties-Government

Services and Business Operations

15. Income from Grants and

Donations

c.2. Budget Legislation 86

The Budget Legislation Phase covers the period commencing from the time Congress receives the
President’s Budget, which is inclusive of the NEPand the BESF, up to the President’s approval of the
GAA. This phase is also known as the Budget Authorization Phase, and involves the significant
participation of the Legislative through its deliberations.

Initially, the President’s Budget is assigned to the House of Representatives’ Appropriations

Committee on First Reading. The Appropriations Committee and its various Sub-Committees
schedule and conduct budget hearings to examine the PAPs of the departments and agencies.
Thereafter, the House of Representatives drafts the General Appropriations Bill (GAB). 87

The GABis sponsored, presented and defended by the House of Representatives’ Appropriations
Committee and Sub-Committees in plenary session. As with other laws, the GAB is approved on
Third Reading before the House of Representatives’ version is transmitted to the Senate. 88

After transmission, the Senate conducts its own committee hearings on the GAB. To expedite
proceedings, the Senate may conduct its committee hearings simultaneously with the House of
Representatives’ deliberations. The Senate’s Finance Committee and its Sub-Committees may
submit the proposed amendments to the GAB to the plenary of the Senate only after the House of
Representatives has formally transmitted its version to the Senate. The Senate version of the GAB is
likewise approved on Third Reading. 89

The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral
Conference Committee for the purpose of discussing and harmonizing the conflicting provisions of
their versions of the GAB. The "harmonized" version of the GAB is next presented to the President
for approval.  The President reviews the GAB, and prepares the Veto Message where budget items
90

are subjected to direct veto,  or are identified for conditional implementation.
91

If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal
year, the GAA for the preceding fiscal year shall be deemed re-enacted and shall remain in force
and effect until the GAB is passed by the Congress. 92

c.3. Budget Execution 93

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With the GAA now in full force and effect, the next step is the implementation of the budget. The
Budget Execution Phase is primarily the function of the DBM, which is tasked to perform the
following procedures, namely: (1) to issue the programs and guidelines for the release of funds; (2)
to prepare an Allotment and Cash Release Program; (3) to release allotments; and (4) to issue
disbursement authorities.

The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the
various departments and agencies are required to submit Budget Execution Documents(BED) to
outline their plans and performance targets by laying down the physical and financial plan, the
monthly cash program, the estimate of monthly income, and the list of obligations that are not yet
due and demandable.

Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program
(CRP).The ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes
the monthly, quarterly and annual disbursement levels.

Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments
are lesser in scope than appropriations, in that the latter embrace the general legislative authority to
spend. Allotments may be released in two forms – through a comprehensive Agency Budget Matrix
(ABM),  or, individually, by SARO.
94 95

Armed with either the ABM or the SARO, agencies become authorized to incur obligations  on 96

behalf of the Government in order to implement their PAPs. Obligations may be incurred in various
ways, like hiring of personnel, entering into contracts for the supply of goods and services, and using
utilities.

In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority
so that cash may be allocated in payment of the obligations. A cash or disbursement authority that is
periodically issued is referred to as a Notice of Cash Allocation (NCA),  which issuance is based
97

upon an agency’s submission of its Monthly Cash Program and other required documents. The NCA
specifies the maximum amount of cash that can be withdrawn from a government servicing bank for
the period indicated. Apart from the NCA, the DBM may issue a Non-Cash Availment
Authority(NCAA) to authorize non-cash disbursements, or a Cash Disbursement Ceiling(CDC) for
departments with overseas operations to allow the use of income collected by their foreign posts for
their operating requirements.

Actual disbursement or spending of government funds terminates the Budget Execution Phase and
is usually accomplished through the Modified Disbursement Scheme under which disbursements
chargeable against the National Treasury are coursed through the government servicing banks.

c.4. Accountability 98

Accountability is a significant phase of the budget cycle because it ensures that the government
funds have been effectively and efficiently utilized to achieve the State’s socio-economic goals. It
also allows the DBM to assess the performance of agencies during the fiscal year for the purpose of
implementing reforms and establishing new policies.

An agency’s accountability may be examined and evaluated through (1) performance targets and
outcomes; (2) budget accountability reports; (3) review of agency performance; and (4) audit
conducted by the Commission on Audit(COA).

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2.

Nature of the DAP as a fiscal plan

a. DAP was a program designed to

promote economic growth

Policy is always a part of every budget and fiscal decision of any Administration.  The national
99

budget the Executive prepares and presents to Congress represents the Administration’s "blueprint
for public policy" and reflects the Government’s goals and strategies.  As such, the national budget
100

becomes a tangible representation of the programs of the Government in monetary terms, specifying
therein the PAPs and services for which specific amounts of public funds are proposed and
allocated.  Embodied in every national budget is government spending.
101 102

When he assumed office in the middle of 2010, President Aquino made efficiency and transparency
in government spending a significant focus of his Administration. Yet, although such focus resulted
in an improved fiscal deficit of 0.5% in the gross domestic product (GDP) from January to July of
2011, it also unfortunately decelerated government project implementation and payment
schedules.  The World Bank observed that the Philippines’ economic growth could be reduced, and
103

potential growth could be weakened should the Government continue with its underspending and fail
to address the large deficiencies in infrastructure.  The economic situation prevailing in the middle
104

of 2011 thus paved the way for the development and implementation of the DAP as a stimulus
package intended to fast-track public spending and to push economic growth by investing on high-
impact budgetary PAPs to be funded from the "savings" generated during the year as well as from
unprogrammed funds.  In that respect, the DAP was the product of "plain executive policy-making"
105

to stimulate the economy by way of accelerated spending.  The Administration would thereby
106

accelerate government spending by: (1) streamlining the implementation process through the
clustering of infrastructure projects of the Department of Public Works and Highways (DPWH) and
the Department of Education (DepEd),and (2) front loading PPP-related projects  due for
107

implementation in the following year. 108

Did the stimulus package work?

The March 2012 report of the World Bank,  released after the initial implementation of the DAP,
109

revealed that the DAP was partially successful. The disbursements under the DAP contributed 1.3
percentage points to GDP growth by the fourth quarter of 2011.  The continued implementation of
110

the DAP strengthened growth by 11.8% year on year while infrastructure spending rebounded from
a 29% contraction to a 34% growth as of September 2013. 111

The DAP thus proved to be a demonstration that expenditure was a policy instrument that the
Government could use to direct the economies towards growth and development.  The 112

Government, by spending on public infrastructure, would signify its commitment of ensuring

profitability for prospective investors.  The PAPs funded under the DAP were chosen for this reason
113

based on their: (1) multiplier impact on the economy and infrastructure development; (2) beneficial
effect on the poor; and (3) translation into disbursements.
114

b. History of the implementation of

the DAP, and sources of funds
under the DAP

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How the Administration’s economic managers conceptualized and developed the DAP, and finally
presented it to the President remains unknown because the relevant documents appear to be
scarce.

The earliest available document relating to the genesis of the DAP was the memorandum of October
12,2011 from Sec. Abad seeking the approval of the President to implement the proposed DAP. The
memorandum, which contained a list of the funding sources for ₱72.11 billion and of the proposed
priority projects to be funded,  reads:
115

MEMORANDUM FOR THE PRESIDENT

xxxx

SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM (PROJECTS

AND SOURCES OF FUNDS)

DATE: OCTOBER 12, 2011

Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program
totaling ₱72.11 billion. We are already working with all the agencies concerned for the immediate
execution of the projects therein.

A. Fund Sources for the Acceleration Program

Amount
Action
Fund Sources (In million Description
Requested
Php)

FY 2011 30,000 Unreleased Personnel Declare as

Unreleased Services (PS) savings and
Personal appropriations which approve/
Services (PS) will lapse at the end of authorize its use
Appropriations FY 2011 but may be for the 2011
pooled as savings and Disbursement
realigned for priority Acceleration
programs that require Program
immediate funding

FY 2011 482 Unreleased  

Unreleased appropriations (slow
Appropriations moving projects and
programs for
discontinuance)

FY 2010 12,336 Supported by the GFI Approve and

Unprogrammed Dividends authorize its use
Fund for the 2011

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 Disbursement
Acceleration
Program

FY 2010 21,544 Unreleased With prior

Carryover appropriations (slow approval from
Appropriation moving projects and the President in
programs for November 2010
discontinuance) and to declare as
savings from Zero-based Budgeting savings and with
Initiative authority to use
for priority
projects

FY 2011 Budget 7,748 FY 2011 Agency For information

items for Budget items that can
realignment be realigned within the
agency to fund new fast
disbursing projects
DPWH-3.981 Billion
DA – 2.497 Billion
DOT – 1.000 Billion
DepEd – 270 Million

TOTAL 72.110    

B. Projects in the Disbursement Acceleration Program

(Descriptions of projects attached as Annex A)

GOCCs and GFIs

Agency/Project Allotment
(SARO and NCA Release) (in Million Php)

1. LRTA: Rehabilitation of LRT 1 and 2 1,868

2. NHA: 11,050

a. Resettlement of North Triangle residents to 450

Camarin A7
b. Housing for BFP/BJMP 500
c. On-site development for families living 10,000
along dangerous
d. Relocation sites for informal settlers

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 along Iloilo River and its tributaries 100

3. PHIL. HEART CENTER: Upgrading of 357

ageing physical plant and medical equipment

4. CREDIT INFO CORP: Establishment of 75

centralized credit information system

5. PIDS: purchase of land to relocate the PIDS 100

office and building construction

6. HGC: Equity infusion for credit insurance 400

and mortgage guaranty operations of HGC

7. PHIC: Obligations incurred (premium 1,496

subsidy for indigent families) in January-June
2010, booked for payment in Jul[y] – Dec
2010. The delay in payment is due to the
delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
pay the full amount.

8. Philpost: Purchase of foreclosed property. 644

Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege

9. BSP: First equity infusion out of Php 40B 10,000

capitalization under the BSP Law

10. PCMC: Capital and Equipment Renovation 280

11. LCOP: 105

a. Pediatric Pulmonary Program
b. Bio-regenerative Technology Program 35
(Stem-Cell Research – subject to legal
review and presentation)
70

12. TIDCORP: NG Equity infusion 570

TOTAL 26,945

NGAs/LGUs

Agency/Project Allotment
(SARO) Cash
(In Million Requirement

434 | P a g e
 Php) (NCA)

13. DOF-BIR: NPSTAR

centralization of data    
processing and others (To be    
synchronized with GFMIS    
activities) 758 758

14. COA: IT infrastructure

program and hiring of    
additional litigational experts 144 144

15. DND-PAF: On Base Housing

Facilities and Communication    
Equipment 30 30

16. DA: 2,959 2,223

a. Irrigation, FMRs and
Integrated Community Based Multi-Species    
Hatchery and Aquasilvi    
Farming 1,629 1,629
b. Mindanao Rural
Development Project 919 183

c. NIA Agno River Integrated

Irrigation Project 411 411

17. DAR: 1,293 1,293

a. Agrarian Reform
Communities Project 2 1,293 132
b. Landowners Compensation 5,432

18. DBM: Conduct of National

Survey of    
Farmers/Fisherfolks/Ips 625 625

19. DOJ: Operating requirements

of 50 investigation agents and    
15 state attorneys 11 11

20. DOT: Preservation of the Cine

Corregidor Complex 25 25

21. OPAPP: Activities for Peace

Process (PAMANA- Project    
details: budget breakdown,    

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 implementation plan, and    
conditions on fund release    
attached as Annex B) 1,819 1,819

22. DOST 425 425

a. Establishment of National
Meterological and Climate    
Center 275 275
b. Enhancement of Doppler
Radar Network for National    
Weather Watch, Accurate    
Forecasting and Flood Early    
Warning 190 190

23. DOF-BOC: To settle the

principal obligations with    
PDIC consistent with the    
agreement with the CISS and    
SGS 2,800 2,800

24. OEO-FDCP: Establishment of

the National Film Archive and    
local cinematheques, and other    
local activities 20 20

25. DPWH: Various infrastructure

projects 5,500 5,500

26. DepEd/ERDT/DOST: Thin

Client Cloud Computing    
Project 270 270

27. DOH: Hiring of nurses and

midwives 294 294

28. TESDA: Training Program in

partnership with BPO industry    
and other sectors 1,100 1,100

29. DILG: Performance Challenge

Fund (People Empowered    
Community Driven    
Development with DSWD and    
NAPC) 250 50

30. ARMM: Comprehensive Peace

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 and Development Intervention 8,592 8,592

31. DOTC-MRT: Purchase of

additional MRT cars 4,500 -

32. LGU Support Fund 6,500 6,500

33. Various Other Local Projects 6,500 6,500

34. Development Assistance to the

Province of Quezon 750 750

TOTAL 45,165 44,000

C. Summary

  Fund Sources
Identified for Allotments Cash
Approval for Release Requirements for
(In Million Release in FY
Php) 2011

Total 72,110 72,110 70,895

GOCCs 26,895 26,895

NGAs/LGUs 45,165 44,000

For His Excellency’s Consideration

(Sgd.) FLORENCIO B. ABAD

[/] APPROVED

[ ] DISAPPROVED

(Sgd.) H.E. BENIGNO S. AQUINO, III

OCT 12, 2011

The memorandum of October 12, 2011 was followed by another memorandum for the President
dated December 12, 2011  requesting omnibus authority to consolidate the savings and unutilized
116

balances for fiscal year 2011. Pertinent portions of the memorandum of December 12, 2011 read:

MEMORANDUM FOR THE PRESIDENT

437 | P a g e
 xxxx

SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment

DATE: December 12, 2011

This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized
balances in FY 2011 corresponding to completed or discontinued projects which may be pooled to
fund additional projects or expenditures.

In addition, Mr. President, this measure will allow us to undertake projects even if their
implementation carries over to 2012 without necessarily impacting on our budget deficit cap next
year.

BACKGROUND

1.0 The DBM, during the course of performance reviews conducted on the agencies’
operations, particularly on the implementation of their projects/activities, including expenses
incurred in undertaking the same, have identified savings out of the 2011 General
Appropriations Act. Said savings correspond to completed or discontinued projects under
certain departments/agencies which may be pooled, for the following:

1.1 to provide for new activities which have not been anticipated during preparation
of the budget;

1.2 to augment additional requirements of on-going priority projects; and

1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF,
Calamity Fund, Contingent Fund

1.4 to cover for the modifications of the original allotment class allocation as a result
of on-going priority projects and implementation of new activities

2.0 x x x x

2.1 x x x

2.2 x x x

ON THE UTILIZATION OF POOLED SAVINGS

3.0 It may be recalled that the President approved our request for omnibus authority to pool
savings/unutilized balances in FY 2010 last November 25, 2010.

4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure the
corresponding approval/confirmation of the President. Furthermore, it is assured that the
proposed realignments shall be within the authorized Expenditure level.

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 5.0 Relative thereto, we have identified some expenditure items that may be sourced from
the said pooled appropriations in FY 2010 that will expire on December 31, 2011 and
appropriations in FY 2011 that may be declared as savings to fund additional expenditures.

5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent for
the projects that we have identified to be immediate actual disbursements
considering that this same fund source will expire on December 31, 2011.

5.2 With respect to the proposed expenditure items to be funded from the FY 2011
Unreleased Appropriations, most of these are the same projects for which the DBM
is directed by the Office of the President, thru the Executive Secretary, to source
funds.

6.0 Among others, the following are such proposed additional projects that have been
chosen given their multiplier impact on economy and infrastructure development, their
beneficial effect on the poor, and their translation into disbursements. Please note that we
have classified the list of proposed projects as follows:

7.0 x x x

FOR THE PRESIDENT’S APPROVAL

8.0 Foregoing considered, may we respectfully request for the President’s approval for the
following:

8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized balances

and its realignment; and

8.2 The proposed additional projects identified for funding.

For His Excellency’s consideration and approval.

(Sgd.)

[/] APPROVED

[ ] DISAPPROVED

(Sgd.) H.E. BENIGNO S. AQUINO, III

DEC 21, 2011

Substantially identical requests for authority to pool savings and to fund proposed projects were
contained in various other memoranda from Sec. Abad dated June 25, 2012,  September 4,
117

2012,  December 19, 2012,  May 20, 2013,  and September 25, 2013.  The President apparently
118 119 120 121

approved all the requests, withholding approval only of the proposed projects contained in the June
25, 2012 memorandum, as borne out by his marginal note therein to the effect that the proposed
projects should still be "subject to further discussions." 122

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In order to implement the June25, 2012 memorandum, Sec. Abad issued NBC No. 541 (Adoption of
Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30,
2012),  reproduced herein as follows:
123

NATIONAL BUDGET CIRCULAR No. 541

July 18, 2012

TO: All Heads of Departments/Agencies/State Universities and Colleges and other Offices of the
National Government, Budget and Planning Officers; Heads of Accounting Units and All Others
Concerned

SUBJECT : Adoption of Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated

Allotments as of June 30, 2012

1.0 Rationale

The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987),
periodically reviews and evaluates the departments/agencies’ efficiency and effectiveness in utilizing
budgeted funds for the delivery of services and production of goods, consistent with the government
priorities.

In the event that a measure is necessary to further improve the operational efficiency of the
government, the President is authorized to suspend or stop further use of funds allotted for any
agency or expenditure authorized in the General Appropriations Act. Withdrawal and pooling of
unutilized allotment releases can be effected by DBM based on authority of the President, as
mandated under Sections 38 and 39, Chapter 5, Book VI of EO 292.

For the first five months of 2012, the National Government has not met its spending targets. In order
to accelerate spending and sustain the fiscal targets during the year, expenditure measures have to
be implemented to optimize the utilization of available resources.

Departments/agencies have registered low spending levels, in terms of obligations and

disbursements per initial review of their 2012 performance. To enhance agencies’ performance, the
DBM conducts continuous consultation meetings and/or send call-up letters, requesting them to
identify slow-moving programs/projects and the factors/issues affecting their performance (both
pertaining to internal systems and those which are outside the agencies’ spheres of control). Also,
they are asked to formulate strategies and improvement plans for the rest of 2012.

Notwithstanding these initiatives, some departments/agencies have continued to post low obligation
levels as of end of first semester, thus resulting to substantial unobligated allotments.

In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of
unobligated allotments of agencies with low levels of obligations as of June 30, 2012, both for
continuing and current allotments. This measure will allow the maximum utilization of available
allotments to fund and undertake other priority expenditures of the national government.

2.0 Purpose

440 | P a g e
 2.1 To provide the conditions and parameters on the withdrawal of unobligated allotments of
agencies as of June 30, 2012 to fund priority and/or fast-moving programs/projects of the
national government;

2.2 To prescribe the reports and documents to be used as bases on the withdrawal of said
unobligated allotments; and

2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.

3.0 Coverage

3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30,
2012 of all national government agencies (NGAs) charged against FY 2011 Continuing
Appropriation (R.A. No.10147) and FY 2012 Current Appropriation (R.A. No. 10155),
pertaining to:

3.1.1 Capital Outlays (CO);

3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the

implementation of programs and projects, as well as capitalized MOOE; and

3.1.3 Personal Services corresponding to unutilized pension benefits declared as

savings by the agencies concerned based on their updated/validated list of
pensioners.

3.2 The withdrawal of unobligated allotments may cover the identified programs, projects
and activities of the departments/agencies reflected in the DBM list shown as Annex A or
specific programs and projects as may be identified by the agencies.

4.0 Exemption

These guidelines shall not apply to the following:

4.1 NGAs

4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy under

the Philippine Constitution; and

4.1.2 State Universities and Colleges, adopting the Normative Funding allocation
scheme i.e., distribution of a predetermined budget ceiling.

4.2 Fund Sources

4.2.1 Personal Services other than pension benefits;

4.2.2 MOOE items earmarked for specific purposes or subject to realignment

conditions per General Provisions of the GAA:

• Confidential and Intelligence Fund;

441 | P a g e
 • Savings from Traveling, Communication, Transportation and Delivery,
Repair and Maintenance, Supplies and Materials and Utility which shall be
used for the grant of Collective Negotiation Agreement incentive benefit;

• Savings from mandatory expenditures which can be realigned only in the

last quarter after taking into consideration the agency’s full year
requirements, i.e., Petroleum, Oil and Lubricants, Water, Illumination, Power
Services, Telephone, other Communication Services and Rent.

4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);

4.2.4 Special Purpose Funds such as: E-Government Fund, International

Commitments Fund, PAMANA, Priority Development Assistance Fund, Calamity
Fund, Budgetary Support to GOCCs and Allocation to LGUs, among others;

4.2.5 Quick Response Funds; and

4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and Special
Accounts in the General Fund.

5.0 Guidelines

5.1 National government agencies shall continue to undertake procurement activities

notwithstanding the implementation of the policy of withdrawal of unobligated allotments until
the end of the third quarter, FY 2012. Even without the allotments, the agency shall proceed
in undertaking the procurement processes (i.e., procurement planning up to the conduct of
bidding but short of awarding of contract) pursuant to GPPB Circular Nos. 02-2008 and 01-
2009 and DBM Circular Letter No. 2010-9.

5.2 For the purpose of determining the amount of unobligated allotments that shall be
withdrawn, all departments/agencies/operating units (OUs) shall submit to DBM not later
than July 30, 2012, the following budget accountability reports as of June 30, 2012;

• Statement of Allotments, Obligations and Balances (SAOB);

• Financial Report of Operations (FRO); and

• Physical Report of Operations.

5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the
agency’s latest report available shall be used by DBM as basis for withdrawal of allotment.
The DBM shall compute/approximate the agency’s obligation level as of June 30 to derive its
unobligated allotments as of same period. Example: If the March 31 SAOB or FRO reflects
actual obligations of P 800M then the June 30 obligation level shall approximate to ₱1,600 M
(i.e., ₱800 M x 2 quarters).

5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained
unobligated as of June 30, 2012 shall be immediately considered for withdrawal. This policy
is based on the following considerations:

442 | P a g e
 5.4.1 The departments/agencies’ approved priority programs and projects are
assumed to be implementation-ready and doable during the given fiscal year; and

5.4.2 The practice of having substantial carryover appropriations may imply that the
agency has a slower-than-programmed implementation capacity or agency tends to
implement projects within a two-year timeframe.

5.5. Consistent with the President’s directive, the DBM shall, based on evaluation of the
reports cited above and results of consultations with the departments/agencies, withdraw the
unobligated allotments as of June 30, 2012 through issuance of negative Special Allotment
Release Orders (SAROs).

5.6 DBM shall prepare and submit to the President, a report on the magnitude of withdrawn
allotments. The report shall highlight the agencies which failed to submit the June 30 reports
required under this Circular.

5.7 The withdrawn allotments may be:

5.7.1 Reissued for the original programs and projects of the agencies/OUs
concerned, from which the allotments were withdrawn;

5.7.2 Realigned to cover additional funding for other existing programs and projects
of the agency/OU; or

5.7.3 Used to augment existing programs and projects of any agency and to fund
priority programs and projects not considered in the 2012 budget but expected to be
started or implemented during the current year.

5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a Special
Budget Request (SBR), supported with the following:

5.8.1 Physical and Financial Plan (PFP);

5.8.2 Monthly Cash Program (MCP); and

5.8.3 Proof that the project/activity has started the procurement processes i.e., Proof
of Posting and/or Advertisement of the Invitation to Bid.

5.9 The deadline for submission of request/s pertaining to these categories shall be until the
end of the third quarter i.e., September 30, 2012. After said cut-off date, the withdrawn
allotments shall be pooled and form part of the overall savings of the national government.

5.10 Utilization of the consolidated withdrawn allotments for other priority programs and
projects as cited under item 5.7.3 of this Circular, shall be subject to approval of the
President. Based on the approval of the President, DBM shall issue the SARO to cover the
approved priority expenditures subject to submission by the agency/OU concerned of the
SBR and supported with PFP and MCP.

5.11 It is understood that all releases to be made out of the withdrawn allotments (both 2011
and 2012 unobligated allotments) shall be within the approved Expenditure Program level of
the national government for the current year. The SAROs to be issued shall properly disclose

443 | P a g e
 the appropriation source of the release to determine the extent of allotment validity, as
follows:

• For charges under R.A. 10147 – allotments shall be valid up to December 31, 2012;
and

• For charges under R.A. 10155 – allotments shall be valid up to December 31, 2013.

5.12 Timely compliance with the submission of existing BARs and other reportorial
requirements is reiterated for monitoring purposes.

6.0 Effectivity

This circular shall take effect immediately.

(Sgd.) FLORENCIO B. ABAD

Secretary

As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and
departments as of June 30, 2012 that were charged against the continuing appropriations for fiscal
year 2011 and the 2012 GAA (R.A. No. 10155) were subject to withdrawal through the issuance of
negative SAROs, but such allotments could be either: (1) reissued for the original PAPs of the
concerned agencies from which they were withdrawn; or (2) realigned to cover additional funding for
other existing PAPs of the concerned agencies; or (3) used to augment existing PAPs of any agency
and to fund priority PAPs not considered in the 2012 budget but expected to be started or
implemented in 2012. Financing the other priority PAPs was made subject to the approval of the
President. Note here that NBC No. 541 used terminologies like "realignment" and "augmentation" in
the application of the withdrawn unobligated allotments.

Taken together, all the issuances showed how the DAP was to be implemented and funded, that is
— (1) by declaring "savings" coming from the various departments and agencies derived from
pooling unobligated allotments and withdrawing unreleased appropriations; (2) releasing
unprogrammed funds; and (3) applying the "savings" and unprogrammed funds to augment existing
PAPs or to support other priority PAPs.

c. DAP was not an appropriation

measure; hence, no appropriation
law was required to adopt or to
implement it

Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to
establish the DAP, or to authorize the disbursement and release of public funds to implement the
DAP. Villegas, PHILCONSA, IBP, Araullo, and COURAGE observe that the appropriations funded
under the DAP were not included in the 2011, 2012 and 2013 GAAs. To petitioners IBP, Araullo, and
COURAGE, the DAP, being actually an appropriation that set aside public funds for public use,
should require an enabling law for its validity. VACC maintains that the DAP, because it involved
huge allocations that were separate and distinct from the GAAs, circumvented and duplicated the
GAAs without congressional authorization and control.

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The petitioners contend in unison that based on how it was developed and implemented the DAP
violated the mandate of Section 29(1), Article VI of the 1987 Constitution that "[n]o money shall be
paid out of the Treasury except in pursuance of an appropriation made by law."

The OSG posits, however, that no law was necessary for the adoption and implementation of the
DAP because of its being neither a fund nor an appropriation, but a program or an administrative
system of prioritizing spending; and that the adoption of the DAP was by virtue of the authority of the
President as the Chief Executive to ensure that laws were faithfully executed.

We agree with the OSG’s position.

The DAP was a government policy or strategy designed to stimulate the economy through
accelerated spending. In the context of the DAP’s adoption and implementation being a function
pertaining to the Executive as the main actor during the Budget Execution Stage under its
constitutional mandate to faithfully execute the laws, including the GAAs, Congress did not need to
legislate to adopt or to implement the DAP. Congress could appropriate but would have nothing
more to do during the Budget Execution Stage. Indeed, appropriation was the act by which
Congress "designates a particular fund, or sets apart a specified portion of the public revenue or of
the money in the public treasury, to be applied to some general object of governmental expenditure,
or to some individual purchase or expense."  As pointed out in Gonzales v. Raquiza:  ‘"In a strict
124 125

sense, appropriation has been defined ‘as nothing more than the legislative authorization prescribed
by the Constitution that money may be paid out of the Treasury,’ while appropriation made by law
refers to ‘the act of the legislature setting apart or assigning to a particular use a certain sum to be
used in the payment of debt or dues from the State to its creditors.’"126

On the other hand, the President, in keeping with his duty to faithfully execute the laws, had
sufficient discretion during the execution of the budget to adapt the budget to changes in the
country’s economic situation.  He could adopt a plan like the DAP for the purpose. He could pool
127

the savings and identify the PAPs to be funded under the DAP. The pooling of savings pursuant to
the DAP, and the identification of the PAPs to be funded under the DAP did not involve appropriation
in the strict sense because the money had been already set apart from the public treasury by
Congress through the GAAs. In such actions, the Executive did not usurp the power vested in
Congress under Section 29(1), Article VI of the Constitution.

3.
Unreleased appropriations and withdrawn
unobligated allotments under the DAP
were not savings, and the use of such
appropriations contravened Section 25(5),
Article VI of the 1987 Constitution.

Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the Executive
to ramp up spending to accelerate economic growth, the challenges posed by the petitioners
constrain us to dissect the mechanics of the actual execution of the DAP. The management and
utilization of the public wealth inevitably demands a most careful scrutiny of whether the Executive’s
implementation of the DAP was consistent with the Constitution, the relevant GAAs and other
existing laws.

a. Although executive discretion

and flexibility are necessary in
the execution of the budget, any
transfer of appropriated funds

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should conform to Section 25(5),
Article VI of the Constitution

We begin this dissection by reiterating that Congress cannot anticipate all issues and needs that
may come into play once the budget reaches its execution stage. Executive discretion is necessary
at that stage to achieve a sound fiscal administration and assure effective budget implementation.
The heads of offices, particularly the President, require flexibility in their operations under
performance budgeting to enable them to make whatever adjustments are needed to meet
established work goals under changing conditions.  In particular, the power to transfer funds can
128

give the President the flexibility to meet unforeseen events that may otherwise impede the efficient
implementation of the PAPs set by Congress in the GAA.

Congress has traditionally allowed much flexibility to the President in allocating funds pursuant to the
GAAs,  particularly when the funds are grouped to form lump sum accounts.  It is assumed that the
129 130

agencies of the Government enjoy more flexibility when the GAAs provide broader appropriation
items.  This flexibility comes in the form of policies that the Executive may adopt during the budget
131

execution phase. The DAP – as a strategy to improve the country’s economic position – was one
policy that the President decided to carry out in order to fulfill his mandate under the GAAs.

Denying to the Executive flexibility in the expenditure process would be counterproductive. In

Presidential Spending Power,  Prof. Louis Fisher, an American constitutional scholar whose
132

specialties have included budget policy, has justified extending discretionary authority to the
Executive thusly:

[T]he impulse to deny discretionary authority altogether should be resisted. There are many number
of reasons why obligations and outlays by administrators may have to differ from appropriations by
legislators. Appropriations are made many months, and sometimes years, in advance of
expenditures. Congress acts with imperfect knowledge in trying to legislate in fields that are highly
technical and constantly undergoing change. New circumstances will develop to make obsolete and
mistaken the decisions reached by Congress at the appropriation stage. It is not practicable for
Congress to adjust to each new development by passing separate supplemental appropriation bills.
Were Congress to control expenditures by confining administrators to narrow statutory details, it
would perhaps protect its power of the purse but it would not protect the purse itself. The realities
and complexities of public policy require executive discretion for the sound management of public
funds.

xxxx

x x x The expenditure process, by its very nature, requires substantial discretion for administrators.
They need to exercise judgment and take responsibility for their actions, but those actions ought to
be directed toward executing congressional, not administrative policy. Let there be discretion, but
channel it and use it to satisfy the programs and priorities established by Congress.

In contrast, by allowing to the heads of offices some power to transfer funds within their respective
offices, the Constitution itself ensures the fiscal autonomy of their offices, and at the same time
maintains the separation of powers among the three main branches of the Government. The Court
has recognized this, and emphasized so in Bengzon v. Drilon,  viz:
133

The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence
and flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and
constraints on the manner the independent constitutional offices allocate and utilize the funds
appropriated for their operations is anathema to fiscal autonomy and violative not only of the express

446 | P a g e
mandate of the Constitution but especially as regards the Supreme Court, of the independence and
separation of powers upon which the entire fabric of our constitutional system is based.

In the case of the President, the power to transfer funds from one item to another within the
Executive has not been the mere offshoot of established usage, but has emanated from law itself. It
has existed since the time of the American Governors-General.  Act No. 1902 (An Act authorizing
134

the Governor-General to direct any unexpended balances of appropriations be returned to the

general fund of the Insular Treasury and to transfer from the general fund moneys which have been
returned thereto), passed on May 18, 1909 by the First Philippine Legislature,  was the first enabling
135

law that granted statutory authority to the President to transfer funds. The authority was without any
limitation, for the Act explicitly empowered the Governor-General to transfer any unexpended
balance of appropriations for any bureau or office to another, and to spend such balance as if it had
originally been appropriated for that bureau or office.

From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be
transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for
contingent or miscellaneous expenses could be transferred to a bureau or office, and the transferred
funds were to be used to cover deficiencies in the appropriations also for miscellaneous expenses of
said bureau or office.

In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous
expenses to any other item of a certain bureau or office was removed.

During the Commonwealth period, the power of the President to transfer funds continued to be
governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935
Constitution did not include a provision on the power to transfer funds. At any rate, a shift in the
extent of the President’s power to transfer funds was again experienced during this era, with the
President being given more flexibility in implementing the budget. The GAAs provided that the power
to transfer all or portions of the appropriations in the Executive Department could be made in the
"interest of the public, as the President may determine." 136

In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly
unbounded discretion in transferring funds.  Its Committee on the Budget and Appropriation
137

proposed to prohibit the transfer of funds among the separate branches of the Government and the
independent constitutional bodies, but to allow instead their respective heads to augment items of
appropriations from savings in their respective budgets under certain limitations.  The clear intention
138

of the Convention was to further restrict, not to liberalize, the power to transfer
appropriations.  Thus, the Committee on the Budget and Appropriation initially considered setting
139

stringent limitations on the power to augment, and suggested that the augmentation of an item of
appropriation could be made "by not more than ten percent if the original item of appropriation to be
augmented does not exceed one million pesos, or by not more than five percent if the original item of
appropriation to be augmented exceeds one million pesos."  But two members of the Committee
140

objected to the ₱1,000,000.00 threshold, saying that the amount was arbitrary and might not be
reasonable in the future. The Committee agreed to eliminate the ₱1,000,000.00 threshold, and
settled on the ten percent limitation.
141

In the end, the ten percent limitation was discarded during the plenary of the Convention, which
adopted the following final version under Section 16, Article VIII of the 1973 Constitution, to wit:

(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
Prime Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional

447 | P a g e
Commissions may by law be authorized to augment any item in the general appropriations law for
their respective offices from savings in other items of their respective appropriations.

The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to
another, unless Congress enacted a law authorizing the President, the Prime Minister, the Speaker,
the Chief Justice of the Supreme Court, and the heads of the Constitutional omissions to transfer
funds for the purpose of augmenting any item from savings in another item in the GAA of their
respective offices. The leeway was limited to augmentation only, and was further constricted by the
condition that the funds to be transferred should come from savings from another item in the
appropriation of the office.
142

On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:

Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer
any fund appropriated for the different departments, bureaus, offices and agencies of the Executive
Department which are included in the General Appropriations Act, to any program, project, or activity
of any department, bureau or office included in the General Appropriations Act or approved after its
enactment.

The President shall, likewise, have the authority to augment any appropriation of the Executive
Department in the General Appropriations Act, from savings in the appropriations of another
department, bureau, office or agency within the Executive Branch, pursuant to the provisions of
Article VIII, Section 16 (5) of the Constitution.

In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for
contravening Section 16(5)of the 1973 Constitution, ruling:

Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said
Section 16. It empowers the President to indiscriminately transfer funds from one department,
bureau, office or agency of the Executive Department to any program, project or activity of any
department, bureau or office included in the General Appropriations Act or approved after its
enactment, without regard as to whether or not the funds to be transferred are actually savings in the
item from which the same are to be taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made. It does not only completely disregard the
standards set in the fundamental law, thereby amounting to an undue delegation of legislative
powers, but likewise goes beyond the tenor thereof. Indeed, such constitutional infirmities render the
provision in question null and void.143

It is significant that Demetria was promulgated 25 days after the ratification by the people of the
1987 Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the
1973 Constitution, to wit:

Section 25. x x x

xxxx

5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to
augment any item in the general appropriations law for their respective offices from savings in other
items of their respective appropriations.

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 xxxx

The foregoing history makes it evident that the Constitutional Commission included Section 25(5),
supra, to keep a tight rein on the exercise of the power to transfer funds appropriated by Congress
by the President and the other high officials of the Government named therein. The Court stated in
Nazareth v. Villar:144

In the funding of current activities, projects, and programs, the general rule should still be that the
budgetary amount contained in the appropriations bill is the extent Congress will determine as
sufficient for the budgetary allocation for the proponent agency. The only exception is found in
Section 25 (5), Article VI of the Constitution, by which the President, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of
Constitutional Commissions are authorized to transfer appropriations to augmentany item in the
GAA for their respective offices from the savings in other items of their respective appropriations.
The plain language of the constitutional restriction leaves no room for the petitioner’s posture, which
we should now dispose of as untenable.

It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article
VI of the Constitution limiting the authority to transfer savings only to augment another item in the
GAA is strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v.
Commission on Elections:

When the statute itself enumerates the exceptions to the application of the general rule, the
exceptions are strictly but reasonably construed. The exceptions extend only as far as their
language fairly warrants, and all doubts should be resolved in favor of the general provision rather
than the exceptions. Where the general rule is established by a statute with exceptions, none but the
enacting authority can curtail the former. Not even the courts may add to the latter by implication,
and it is a rule that an express exception excludes all others, although it is always proper in
determining the applicability of the rule to inquire whether, in a particular case, it accords with reason
and justice.

The appropriate and natural office of the exception is to exempt something from the scope of the
general words of a statute, which is otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the intent that the statute shall
apply to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any
doubt will be resolved in favor of the general provision and against the exception. Indeed, the liberal
construction of a statute will seem to require in many circumstances that the exception, by which the
operation of the statute is limited or abridged, should receive a restricted construction.

Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the President’s
discretion over the appropriations during the Budget Execution Phase.

b. Requisites for the valid transfer of

appropriated funds under Section
25(5), Article VI of the 1987
Constitution

The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon a
concurrence of the following requisites, namely:

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 (1) There is a law authorizing the President, the President of the Senate, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, and the heads of the
Constitutional Commissions to transfer funds within their respective offices;

(2) The funds to be transferred are savings generated from the appropriations for their
respective offices; and (3) The purpose of the transfer is to augment an item in the general
appropriations law for their respective offices.

b.1. First Requisite–GAAs of 2011 and

2012 lacked valid provisions to
authorize transfers of funds under
the DAP; hence, transfers under the
DAP were unconstitutional

Section 25(5), supra, not being a self-executing provision of the Constitution, must have an
implementing law for it to be operative. That law, generally, is the GAA of a given fiscal year. To
comply with the first requisite, the GAAs should expressly authorize the transfer of funds.

Did the GAAs expressly authorize the transfer of funds?

In the 2011 GAA, the provision that gave the President and the other high officials the authority to
transfer funds was Section 59, as follows:

Section 59. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any
item in this Act from savings in other items of their respective appropriations.

In the 2012 GAA, the empowering provision was Section 53, to wit:

Section 53. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any
item in this Act from savings in other items of their respective appropriations.

In fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as justification
for the use of savings under the DAP. 145

A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and 2012 were
textually unfaithful to the Constitution for not carrying the phrase "for their respective offices"
contained in Section 25(5), supra. The impact of the phrase "for their respective offices" was to
authorize only transfers of funds within their offices (i.e., in the case of the President, the transfer
was to an item of appropriation within the Executive). The provisions carried a different phrase ("to
augment any item in this Act"), and the effect was that the 2011 and 2012 GAAs thereby literally
allowed the transfer of funds from savings to augment any item in the GAAs even if the item
belonged to an office outside the Executive. To that extent did the 2011 and 2012 GAAs contravene
the Constitution. At the very least, the aforequoted provisions cannot be used to claim authority to
transfer appropriations from the Executive to another branch, or to a constitutional commission.

Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart provision
in the 2013 GAA, to wit:

450 | P a g e
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings
in their respective appropriations to augment actual deficiencies incurred for the current year in any
item of their respective appropriations.

Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra, existed,
there still remained two other requisites to be met, namely: that the source of funds to be transferred
were savings from appropriations within the respective offices; and that the transfer must be for the
purpose of augmenting an item of appropriation within the respective offices.

b.2. Second Requisite – There were

no savings from which funds
could be sourced for the DAP
Were the funds used in the DAP actually savings?

The petitioners claim that the funds used in the DAP — the unreleased appropriations and
withdrawn unobligated allotments — were not actual savings within the context of Section 25(5),
supra, and the relevant provisions of the GAAs. Belgica argues that "savings" should be understood
to refer to the excess money after the items that needed to be funded have been funded, or those
that needed to be paid have been paid pursuant to the budget.  The petitioners posit that there
146

could be savings only when the PAPs for which the funds had been appropriated were actually
implemented and completed, or finally discontinued or abandoned. They insist that savings could not
be realized with certainty in the middle of the fiscal year; and that the funds for "slow-moving" PAPs
could not be considered as savings because such PAPs had not actually been abandoned or
discontinued yet.  They stress that NBC No. 541, by allowing the withdrawn funds to be reissued to
147

the "original program or project from which it was withdrawn," conceded that the PAPs from which
the supposed savings were taken had not been completed, abandoned or discontinued. 148

The OSG represents that "savings" were "appropriations balances," being the difference between
the appropriation authorized by Congress and the actual amount allotted for the appropriation; that
the definition of "savings" in the GAAs set only the parameters for determining when savings
occurred; that it was still the President (as well as the other officers vested by the Constitution with
the authority to augment) who ultimately determined when savings actually existed because savings
could be determined only during the stage of budget execution; that the President must be given a
wide discretion to accomplish his tasks; and that the withdrawn unobligated allotments were savings
inasmuch as they were clearly "portions or balances of any programmed appropriation…free from
any obligation or encumbrances which are (i) still available after the completion or final
discontinuance or abandonment of the work, activity or purpose for which the appropriation is
authorized…"

We partially find for the petitioners.

In ascertaining the meaning of savings, certain principles should be borne in mind. The first principle
is that Congress wields the power of the purse. Congress decides how the budget will be spent;
what PAPs to fund; and the amounts of money to be spent for each PAP. The second principle is
that the Executive, as the department of the Government tasked to enforce the laws, is expected to
faithfully execute the GAA and to spend the budget in accordance with the provisions of the
GAA.  The Executive is expected to faithfully implement the PAPs for which Congress allocated
149

funds, and to limit the expenditures within the allocations, unless exigencies result to deficiencies for
which augmentation is authorized, subject to the conditions provided by law. The third principle is
that in making the President’s power to augment operative under the GAA, Congress recognizes the

451 | P a g e
need for flexibility in budget execution. In so doing, Congress diminishes its own power of the purse,
for it delegates a fraction of its power to the Executive. But Congress does not thereby allow the
Executive to override its authority over the purse as to let the Executive exceed its delegated
authority. And the fourth principle is that savings should be actual. "Actual" denotes something that
is real or substantial, or something that exists presently in fact, as opposed to something that is
merely theoretical, possible, potential or hypothetical.
150

The foregoing principles caution us to construe savings strictly against expanding the scope of the
power to augment. It is then indubitable that the power to augment was to be used only when the
purpose for which the funds had been allocated were already satisfied, or the need for such funds
had ceased to exist, for only then could savings be properly realized. This interpretation prevents the
Executive from unduly transgressing Congress’ power of the purse.

The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this
interpretation and made it operational, viz:

Savings refer to portions or balances of any programmed appropriation in this Act free from any
obligation or encumbrance which are: (i) still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized; (ii) from
appropriations balances arising from unpaid compensation and related costs pertaining to vacant
positions and leaves of absence without pay; and (iii) from appropriations balances realized from the
implementation of measures resulting in improved systems and efficiencies and thus enabled
agencies to meet and deliver the required or planned targets, programs and services approved in
this Act at a lesser cost.

The three instances listed in the GAAs’ aforequoted definition were a sure indication that savings
could be generated only upon the purpose of the appropriation being fulfilled, or upon the need for
the appropriation being no longer existent.

The phrase "free from any obligation or encumbrance" in the definition of savings in the GAAs
conveyed the notion that the appropriation was at that stage when the appropriation was already
obligated and the appropriation was already released. This interpretation was reinforced by the
enumeration of the three instances for savings to arise, which showed that the appropriation referred
to had reached the agency level. It could not be otherwise, considering that only when the
appropriation had reached the agency level could it be determined whether (a) the PAP for which the
appropriation had been authorized was completed, finally discontinued, or abandoned; or (b) there
were vacant positions and leaves of absence without pay; or (c) the required or planned targets,
programs and services were realized at a lesser cost because of the implementation of measures
resulting in improved systems and efficiencies.

The DBM declares that part of the savings brought under the DAP came from "pooling of unreleased
appropriations such as unreleased Personnel Services appropriations which will lapse at the end of
the year, unreleased appropriations of slow moving projects and discontinued projects per Zero-
Based Budgeting findings."

The declaration of the DBM by itself does not state the clear legal basis for the treatment of
unreleased or unalloted appropriations as savings.

The fact alone that the appropriations are unreleased or unalloted is a mere description of the status
of the items as unalloted or unreleased. They have not yet ripened into categories of items from
which savings can be generated. Appropriations have been considered "released" if there has
already been an allotment or authorization to incur obligations and disbursement authority. This

452 | P a g e
means that the DBM has issued either an ABM (for those not needing clearance), or a SARO (for
those needing clearance), and consequently an NCA, NCAA or CDC, as the case may be.
Appropriations remain unreleased, for instance, because of noncompliance with documentary
requirements (like the Special Budget Request), or simply because of the unavailability of funds. But
the appropriations do not actually reach the agencies to which they were allocated under the GAAs,
and have remained with the DBM technically speaking. Ergo, unreleased appropriations refer to
appropriations with allotments but without disbursement authority.

For us to consider unreleased appropriations as savings, unless these met the statutory definition of
savings, would seriously undercut the congressional power of the purse, because such
appropriations had not even reached and been used by the agency concerned vis-à-vis the PAPs for
which Congress had allocated them. However, if an agency has unfilled positions in its plantilla and
did not receive an allotment and NCA for such vacancies, appropriations for such positions, although
unreleased, may already constitute savings for that agency under the second instance.

Unobligated allotments, on the other hand, were encompassed by the first part of the definition of
"savings" in the GAA, that is, as "portions or balances of any programmed appropriation in this Act
free from any obligation or encumbrance." But the first part of the definition was further qualified by
the three enumerated instances of when savings would be realized. As such, unobligated allotments
could not be indiscriminately declared as savings without first determining whether any of the three
instances existed. This signified that the DBM’s withdrawal of unobligated allotments had
disregarded the definition of savings under the GAAs.

Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE appropriations
are deemed divided into twelve monthly allocations within the fiscal year; hence, savings could be
generated monthly from the excess or unused MOOE appropriations other than the Mandatory
Expenditures and Expenditures for Business-type Activities because of the physical impossibility to
obligate and spend such funds as MOOE for a period that already lapsed. Following this
observation, MOOE for future months are not savings and cannot be transferred.

The DBM’s Memorandum for the President dated June 25, 2012 (which became the basis of NBC
No. 541) stated:

ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS

5.0 The DBM, during the course of performance reviews conducted on the agencies’
operations, particularly on the implementation of their projects/activities, including expenses
incurred in undertaking the same, have been continuously calling the attention of all National
Government agencies (NGAs) with low levels of obligations as of end of the first quarter to
speedup the implementation of their programs and projects in the second quarter.

6.0 Said reminders were made in a series of consultation meetings with the concerned
agencies and with call-up letters sent.

7.0 Despite said reminders and the availability of funds at the department’s disposal, the
level of financial performance of some departments registered below program, with the
targeted obligations/disbursements for the first semester still not being met.

8.0 In order to maximize the use of the available allotment, all unobligated balances as of
June 30, 2012, both for continuing and current allotments shall be withdrawn and pooled to
fund fast moving programs/projects.

453 | P a g e
 9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of
slow moving projects to be identified by the agencies and their catch up plans to be
evaluated by the DBM.

It is apparent from the foregoing text that the withdrawal of unobligated allotments would be based
on whether the allotments pertained to slow-moving projects, or not. However, NBC No. 541 did not
set in clear terms the criteria for the withdrawal of unobligated allotments, viz:

3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30,
2012 ofall national government agencies (NGAs) charged against FY 2011 Continuing
Appropriation (R.A. No. 10147) and FY 2012 Current Appropriation (R.A. No. 10155),
pertaining to:

3.1.1 Capital Outlays (CO);

3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the

implementation of programs and projects, as well as capitalized MOOE; and

3.1.3 Personal Services corresponding to unutilized pension benefits declared as

savings by the agencies concerned based on their undated/validated list of
pensioners.

A perusal of its various provisions reveals that NBC No. 541 targeted the "withdrawal of unobligated
allotments of agencies with low levels of obligations"  "to fund priority and/or fast-moving
151

programs/projects."  But the fact that the withdrawn allotments could be "[r]eissued for the original
152

programs and projects of the agencies/OUs concerned, from which the allotments were
withdrawn"  supported the conclusion that the PAPs had not yet been finally discontinued or
153

abandoned. Thus, the purpose for which the withdrawn funds had been appropriated was not yet
fulfilled, or did not yet cease to exist, rendering the declaration of the funds as savings impossible.

Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged
against the 2011 GAA that had remained unobligated based on the following considerations, to wit:

5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and

5.4.2 The practice of having substantial carryover appropriations may imply that the agency
has a slower-than-programmed implementation capacity or agency tends to implement
projects within a two-year timeframe.

Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for
continuing and current appropriations as of June 30, 2012, disregarded the 2-year period of
availability of the appropriations for MOOE and capital outlay extended under Section 65, General
Provisions of the 2011 GAA, viz:

Section 65. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the
year in which such items were appropriated: PROVIDED, That appropriations for MOOE and capital
outlays under R.A. No. 9970 shall be made available up to the end of FY 2011: PROVIDED,

454 | P a g e
FURTHER, That a report on these releases and obligations shall be submitted to the Senate
Committee on Finance and the House Committee on Appropriations.

and Section 63 General Provisions of the 2012 GAA, viz:

Section 63. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the
year in which such items were appropriated: PROVIDED, That a report on these releases and
obligations shall be submitted to the Senate Committee on Finance and the House Committee on
Appropriations, either in printed form or by way of electronic document. 154

Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances
shortened the period of availability of the appropriations for MOOE and capital outlays.

Congress provided a one-year period of availability of the funds for all allotment classes in the 2013
GAA (R.A. No. 10352), to wit:

Section 63. Availability of Appropriations.— All appropriations authorized in this Act shall be
available for release and obligation for the purposes specified, and under the same special
provisions applicable thereto, until the end of FY 2013: PROVIDED, That a report on these releases
and obligations shall be submitted to the Senate Committee on Finance and House Committee on
Appropriations, either in printed form or by way of electronic document.

Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus authority
to consolidate savings and unutilized balances to fund the DAP on a quarterly basis, viz:

7.0 If the level of financial performance of some department will register below program,
even with the availability of funds at their disposal, the targeted obligations/disbursements for
each quarter will not be met. It is important to note that these funds will lapse at the end of
the fiscal year if these remain unobligated.

8.0 To maximize the use of the available allotment, all unobligated balances at the end of
every quarter, both for continuing and current allotments shall be withdrawn and pooled to
fund fast moving programs/projects.

9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of
slow moving projects to be identified by the agencies and their catch up plans to be
evaluated by the DBM.

The validity period of the affected appropriations, already given the brief Lifes pan of one year, was
further shortened to only a quarter of a year under the DBM’s memorandum dated May 20, 2013.

The petitioners accuse the respondents of forcing the generation of savings in order to have a larger
fund available for discretionary spending. They aver that the respondents, by withdrawing
unobligated allotments in the middle of the fiscal year, in effect deprived funding for PAPs with
existing appropriations under the GAAs. 155

The respondents belie the accusation, insisting that the unobligated allotments were being
withdrawn upon the instance of the implementing agencies based on their own assessment that they

455 | P a g e
could not obligate those allotments pursuant to the President’s directive for them to spend their
appropriations as quickly as they could in order to ramp up the economy. 156

We agree with the petitioners.

Contrary to the respondents’ insistence, the withdrawals were upon the initiative of the DBM itself.
The text of NBC No. 541 bears this out, to wit:

5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the
following budget accountability reports as of June 30, 2012;

• Statement of Allotments, Obligation and Balances (SAOB);

• Financial Report of Operations (FRO); and

• Physical Report of Operations.

5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s
latest report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments
as of same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P 800M
then the June 30 obligation level shall approximate to ₱1,600 M (i.e., ₱800 M x 2 quarters).

The petitioners assert that no law had authorized the withdrawal and transfer of unobligated
allotments and the pooling of unreleased appropriations; and that the unbridled withdrawal of
unobligated allotments and the retention of appropriated funds were akin to the impoundment of
appropriations that could be allowed only in case of "unmanageable national government budget
deficit" under the GAAs,  thus violating the provisions of the GAAs of 2011, 2012 and 2013
157

prohibiting the retention or deduction of allotments.

158

In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving, policy as
a last-ditch effort of the Executive to push agencies into actually spending their appropriations; that
such policy did not amount to an impoundment scheme, because impoundment referred to the
decision of the Executive to refuse to spend funds for political or ideological reasons; and that the
withdrawal of allotments under NBC No. 541 was made pursuant to Section 38, Chapter 5, Book VI
of the Administrative Code, by which the President was granted the authority to suspend or
otherwise stop further expenditure of funds allotted to any agency whenever in his judgment the
public interest so required.

The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments
and the pooling of unreleased appropriations were invalid for being bereft of legal support.
Nonetheless, such withdrawal of unobligated allotments and the retention of appropriated funds
cannot be considered as impoundment.

According to Philippine Constitution Association v. Enriquez:  "Impoundment refers to a refusal by

159

the President, for whatever reason, to spend funds made available by Congress. It is the failure to
spend or obligate budget authority of any type." Impoundment under the GAA is understood to mean
the retention or deduction of appropriations. The 2011 GAA authorized impoundment only in case of
unmanageable National Government budget deficit, to wit:

456 | P a g e
Section 66. Prohibition Against Impoundment of Appropriations. No appropriations authorized under
this Act shall be impounded through retention or deduction, unless in accordance with the rules and
regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes,
programs, projects and activities authorized under this Act, except those covered under the
Unprogrammed Fund, shall be released pursuant to Section 33 (3), Chapter 5, Book VI of E.O. No.
292.

Section 67. Unmanageable National Government Budget Deficit. Retention or deduction of

appropriations authorized in this Act shall be effected only in cases where there is an unmanageable
national government budget deficit.

Unmanageable national government budget deficit as used in this section shall be construed to
mean that (i) the actual national government budget deficit has exceeded the quarterly budget deficit
targets consistent with the full-year target deficit as indicated in the FY 2011 Budget of

Expenditures and Sources of Financing submitted by the President and approved by Congress
pursuant to Section 22, Article VII of the Constitution, or (ii) there are clear economic indications of
an impending occurrence of such condition, as determined by the Development Budget Coordinating
Committee and approved by the President.

The 2012 and 2013 GAAs contained similar provisions.

The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment
because it entailed only the transfer of funds, not the retention or deduction of appropriations.

Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs) be
applicable. They uniformly stated:

Section 68. Prohibition Against Retention/Deduction of Allotment. Fund releases from appropriations
provided in this Act shall be transmitted intact or in full to the office or agency concerned. No
retention or deduction as reserves or overhead shall be made, except as authorized by law, or upon
direction of the President of the Philippines. The COA shall ensure compliance with this provision to
the extent that sub-allotments by agencies to their subordinate offices are in conformity with the
release documents issued by the DBM.

The provision obviously pertained to the retention or deduction of allotments upon their release from
the DBM, which was a different matter altogether. The Court should not expand the meaning of the
provision by applying it to the withdrawal of allotments.

The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to justify
the withdrawal of unobligated allotments. But the provision authorized only the suspension or
stoppage of further expenditures, not the withdrawal of unobligated allotments, to wit:

Section 38. Suspension of Expenditure of Appropriations.- Except as otherwise provided in the

General Appropriations Act and whenever in his judgment the public interest so requires, the
President, upon notice to the head of office concerned, is authorized to suspend or otherwise stop
further expenditure of funds allotted for any agency, or any other expenditure authorized in the
General Appropriations Act, except for personal services appropriations used for permanent officials
and employees.

457 | P a g e
Moreover, the DBM did not suspend or stop further expenditures in accordance with Section 38,
supra, but instead transferred the funds to other PAPs.

It is relevant to remind at this juncture that the balances of appropriations that remained unexpended
at the end of the fiscal year were to be reverted to the General Fund.  This was the mandate of
1âwphi1

Section 28, Chapter IV, Book VI of the Administrative Code, to wit:

Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.-

Unexpended balances of appropriations authorized in the General Appropriation Act shall revert to
the unappropriated surplus of the General Fund at the end of the fiscal year and shall not thereafter
be available for expenditure except by subsequent legislative enactment: Provided, that
appropriations for capital outlays shall remain valid until fully spent or reverted: provided, further, that
continuing appropriations for current operating expenditures may be specifically recommended and
approved as such in support of projects whose effective implementation calls for multi-year
expenditure commitments: provided, finally, that the President may authorize the use of savings
realized by an agency during given year to meet non-recurring expenditures in a subsequent year.

The balances of continuing appropriations shall be reviewed as part of the annual budget
preparation process and the preparation process and the President may approve upon
recommendation of the Secretary, the reversion of funds no longer needed in connection with the
activities funded by said continuing appropriations.

The Executive could not circumvent this provision by declaring unreleased appropriations and
unobligated allotments as savings prior to the end of the fiscal year.

b.3. Third Requisite – No funds from

savings could be transferred under
the DAP to augment deficient items
not provided in the GAA

The third requisite for a valid transfer of funds is that the purpose of the transfer should be "to
augment an item in the general appropriations law for the respective offices." The term "augment"
means to enlarge or increase in size, amount, or degree. 160

The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation for the
PAP item to be augmented must be deficient, to wit: –

x x x Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation, or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a non-existent program, activity, or project, be funded by
augmentation from savings or by the use of appropriations otherwise authorized in this Act.

In other words, an appropriation for any PAP must first be determined to be deficient before it could
be augmented from savings. Note is taken of the fact that the 2013 GAA already made this quite
clear, thus:

Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings
in their respective appropriations to augment actual deficiencies incurred for the current year in any
item of their respective appropriations.

458 | P a g e
As of 2013, a total of ₱144.4 billion worth of PAPs were implemented through the DAP. 161

Of this amount ₱82.5 billion were released in 2011 and ₱54.8 billion in 2012.  Sec. Abad has
162

reported that 9% of the total DAP releases were applied to the PAPs identified by the legislators. 163

The petitioners disagree, however, and insist that the DAP supported the following PAPs that had
not been covered with appropriations in the respective GAAs, namely:

(i) ₱1.5 billion for the Cordillera People’s Liberation Army;

(ii) ₱1.8 billion for the Moro National Liberation Front;

(iii) ₱700 million for assistance to Quezon Province; 164

(iv) ₱50 million to ₱100 (million) each to certain senators; 165

(v) ₱10 billion for the relocation of families living along dangerous zones under the National
Housing Authority;

(vi) ₱10 billion and ₱20 billion equity infusion under the Bangko Sentral;

(vii) ₱5.4 billion landowners’ compensation under the Department of Agrarian Reform;

(viii) ₱8.6 billion for the ARMM comprehensive peace and development program;

(ix) ₱6.5 billion augmentation of LGU internal revenue allotments

(x) ₱5 billion for crucial projects like tourism road construction under the Department of
Tourism and the Department of Public Works and Highways;

(xi) ₱1.8 billion for the DAR-DPWH Tulay ng Pangulo;

(xii) ₱1.96 billion for the DOH-DPWH rehabilitation of regional health units; and

(xiii) ₱4 billion for the DepEd-PPP school infrastructure projects. 166

In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had
appropriation covers, and could properly be accounted for because the funds were released
following and pursuant to the standard practices adopted by the DBM.  In support of its argument,
167

the OSG has submitted seven evidence packets containing memoranda, SAROs, and other
pertinent documents relative to the implementation and fund transfers under the DAP. 168

Upon careful review of the documents contained in the seven evidence packets, we conclude that
the "savings" pooled under the DAP were allocated to PAPs that were not covered by any
appropriations in the pertinent GAAs.

For example, the SARO issued on December 22, 2011 for the highly vaunted Disaster Risk,
Exposure, Assessment and Mitigation (DREAM) project under the Department of Science and
Technology (DOST) covered the amount of ₱1.6 Billion,  broken down as follows:
169

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 APPROPRIATION PARTICULARS AMOUNT
CODE AUTHORIZED

A.03.a.01.a Generation of new knowledge and technologies

and research capability building in priority areas
identified as strategic to National Development
Personnel Services
Maintenance and Other Operating Expenses P 43,504,024
Capital Outlays 1,164,517,589
391,978,387
P 1,600,000,000

the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had appropriated
only ₱537,910,000 for MOOE, but nothing for personnel services and capital outlays, to wit:

Personnel Maintenance Capital TOTAL

Services and Other Outlays
Operating
Expenditures

III. Operations

a. Funding Assistance to 177,406,000 1,887,365,000 49,090,000 2,113,861,000

Science
and Technology Activities

1. Central Office 1,554,238,000 1,554,238,000

a. Generation of new
knowledge and
technologies and
research
capability building in
priority areas identified as
strategic to National
Development 537,910,000 537,910,000

Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the
appropriation by Congress for the program Generation of new knowledge and technologies and
research capability building in priority areas identified as strategic to National Development, the
Executive allotted funds for personnel services and capital outlays. The Executive thereby
substituted its will to that of Congress. Worse, the Executive had not earlier proposed any amount
for personnel services and capital outlays in the NEP that became the basis of the 2011 GAA. 170

It is worth stressing in this connection that the failure of the GAAs to set aside any amounts for an
expense category sufficiently indicated that Congress purposely did not see fit to fund, much less
implement, the PAP concerned. This indication becomes clearer when even the President himself

460 | P a g e
did not recommend in the NEP to fund the PAP. The consequence was that any PAP requiring
expenditure that did not receive any appropriation under the GAAs could only be a new PAP, any
funding for which would go beyond the authority laid down by Congress in enacting the GAAs. That
happened in some instances under the DAP.

In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry, Energy and
Emerging Technology Research and Development (DOST-PCIEETRD)  for Establishment of the
171

Advanced Failure Analysis Laboratory, which reads:

APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED

Development, integration and coordination of the

A.02.a National Research System for Industry, Energy and
Emerging Technology and Related Fields P 300,000,000
Capital Outlays

the appropriation code and the particulars appearing in the SARO did not correspond to the program
specified in the GAA, whose particulars were Research and Management Services(inclusive of the
following activities: (1) Technological and Economic Assessment for Industry, Energy and Utilities;
(2) Dissemination of Science and Technology Information; and (3) Management of PCIERD
Information System for Industry, Energy and Utilities. Even assuming that Development, integration
and coordination of the National Research System for Industry, Energy and Emerging Technology
and Related Fields– the particulars stated in the SARO – could fall under the broad program
description of Research and Management Services– as appearing in the SARO, it would
nonetheless remain a new activity by reason of its not being specifically stated in the GAA. As such,
the DBM, sans legislative authorization, could not validly fund and implement such PAP under the
DAP.

In defending the disbursements, however, the OSG contends that the Executive enjoyed sound
discretion in implementing the budget given the generality in the language and the broad policy
objectives identified under the GAAs;  and that the President enjoyed unlimited authority to spend
172

the initial appropriations under his authority to declare and utilize savings,  and in keeping with his
173

duty to faithfully execute the laws.

Although the OSG rightly contends that the Executive was authorized to spend in line with its
mandate to faithfully execute the laws (which included the GAAs), such authority did not translate to
unfettered discretion that allowed the President to substitute his own will for that of Congress. He
was still required to remain faithful to the provisions of the GAAs, given that his power to spend
pursuant to the GAAs was but a delegation to him from Congress. Verily, the power to spend the
public wealth resided in Congress, not in the Executive.  Moreover, leaving the spending power of
174

the Executive unrestricted would threaten to undo the principle of separation of powers. 175

Congress acts as the guardian of the public treasury in faithful discharge of its power of the purse
whenever it deliberates and acts on the budget proposal submitted by the Executive.  Its power of
176

the purse is touted as the very foundation of its institutional strength,  and underpins "all other
177

legislative decisions and regulating the balance of influence between the legislative and executive
branches of government."  Such enormous power encompasses the capacity to generate money for
178

the Government, to appropriate public funds, and to spend the money.  Pertinently, when it
179

exercises its power of the purse, Congress wields control by specifying the PAPs for which public
money should be spent.

461 | P a g e
It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations.  For this purpose, appropriation involves two governing principles, namely: (1) "a
180

Principle of the Public Fisc, asserting that all monies received from whatever source by any part of
the government are public funds;" and (2) "a Principle of Appropriations Control, prohibiting
expenditure of any public money without legislative authorization."  To conform with the governing
181

principles, the Executive cannot circumvent the prohibition by Congress of an expenditure for a PAP
by resorting to either public or private funds.  Nor could the Executive transfer appropriated funds
182

resulting in an increase in the budget for one PAP, for by so doing the appropriation for another PAP
is necessarily decreased. The terms of both appropriations will thereby be violated.

b.4 Third Requisite – Cross-border

augmentations from savings were
prohibited by the Constitution

By providing that the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the Heads of the Constitutional
Commissions may be authorized to augment any item in the GAA "for their respective offices,"
Section 25(5), supra, has delineated borders between their offices, such that funds appropriated for
one office are prohibited from crossing over to another office even in the guise of augmentation of a
deficient item or items. Thus, we call such transfers of funds cross-border transfers or cross-border
augmentations.

To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the entire
Executive, with respect to the President; the Senate, with respect to the Senate President; the
House of Representatives, with respect to the Speaker; the Judiciary, with respect to the Chief
Justice; the Constitutional Commissions, with respect to their respective Chairpersons.

Did any cross-border transfers or augmentations transpire?

During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-border
augmentations, to wit:

JUSTICE BERSAMIN:

Alright, the whole time that you have been Secretary of Department of Budget and Management, did
the Executive Department ever redirect any part of savings of the National Government under your
control cross border to another department?

SECRETARY ABAD:

Well, in the Memos that we submitted to you, such an instance, Your Honor

JUSTICE BERSAMIN:

Can you tell me two instances? I don’t recall having read your material.

SECRETARY ABAD:

Well, the first instance had to do with a request from the House of Representatives. They started
building their e-library in 2010 and they had a budget for about 207 Million but they lack about 43
Million to complete its 250 Million requirements. Prior to that, the COA, in an audit observation

462 | P a g e
informed the Speaker that they had to continue with that construction otherwise the whole building,
as well as the equipments therein may suffer from serious deterioration. And at that time, since the
budget of the House of Representatives was not enough to complete 250 Million, they wrote to the
President requesting for an augmentation of that particular item, which was granted, Your Honor.
The second instance in the Memos is a request from the Commission on Audit. At the time they
were pushing very strongly the good governance programs of the government and therefore, part of
that is a requirement to conduct audits as well as review financial reports of many agencies. And in
the performance of that function, the Commission on Audit needed information technology
equipment as well as hire consultants and litigators to help them with their audit work and for that
they requested funds from the Executive and the President saw that it was important for the
Commission to be provided with those IT equipments and litigators and consultants and the request
was granted, Your Honor.

JUSTICE BERSAMIN:

These cross border examples, cross border augmentations were not supported by appropriations…

SECRETARY ABAD:

They were, we were augmenting existing items within their… (interrupted)

JUSTICE BERSAMIN:

No, appropriations before you augmented because this is a cross border and the tenor or text of the
Constitution is quite clear as far as I am concerned. It says here, "The power to augment may only
be made to increase any item in the General Appropriations Law for their respective offices." Did you
not feel constricted by this provision?

SECRETARY ABAD:

Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your
Honor. What we thought we did was to transfer savings which was needed by the Commission to
address deficiency in an existing item in both the Commission as well as in the House of
Representatives; that’s how we saw…(interrupted)

JUSTICE BERSAMIN:

So your position as Secretary of Budget is that you could do that?

SECRETARY ABAD:

In an extreme instances because…(interrupted)

JUSTICE BERSAMIN:

No, no, in all instances, extreme or not extreme, you could do that, that’s your feeling.

SECRETARY ABAD:

Well, in that particular situation when the request was made by the Commission and the House of
Representatives, we felt that we needed to respond because we felt…(interrupted). 183

463 | P a g e
 The records show, indeed, that funds amounting to ₱143,700,000.00 and ₱250,000,000.00 were
transferred under the DAP respectively to the COA  and the House of Representatives.  Those
184 185

transfers of funds, which constituted cross-border augmentations for being from the Executive to the
COA and the House of Representatives, are graphed as follows: 186

AMOUNT
(In thousand pesos)
DATE
OFFICE PURPOSE
RELEASED
Reserve Releases
Imposed

Commission on IT Infrastructure Program and 11/11/11   143,700

Audit hiring of additional litigation
experts

Congress – Completion of the construction of 07/23/12 207,034 250,000

House of the Legislative Library and (Savings of HOR)
Representative Archives Building/Congressional
s e-library

The respondents further stated in their memorandum that the President "made available" to the
"Commission on Elections the savings of his department upon [its] request for funds…"  This was 187

another instance of a cross-border augmentation.

The respondents justified all the cross-border transfers thusly:

99. The Constitution does not prevent the President from transferring savings of his department to
another department upon the latter’s request, provided it is the recipient department that uses such
funds to augment its own appropriation. In such a case, the President merely gives the other
department access to public funds but he cannot dictate how they shall be applied by that
department whose fiscal autonomy is guaranteed by the Constitution. 188

In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing
Congress, announced a different characterization of the cross-border transfers of funds as in the
nature of "aid" instead of "augmentation," viz:

HONORABLE MENDOZA:

The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these
cross-border transfers? They are transfers of savings as defined in the various General
Appropriations Act. So, that makes it similar to the DAP, the use of savings. There was a cross-
border which appears to be in violation of Section 25, paragraph 5 of Article VI, in the sense that the
border was crossed. But never has it been claimed that the purpose was to augment a deficient item
in another department of the government or agency of the government. The cross-border transfers, if
Your Honors please, were in the nature of [aid] rather than augmentations. Here is a government
entity separate and independent from the Executive Department solely in need of public funds. The
President is there 24 hours a day, 7 days a week. He’s in charge of the whole operation although six

464 | P a g e
or seven heads of government offices are given the power to augment. Only the President stationed
there and in effect in-charge and has the responsibility for the failure of any part of the government.
You have election, for one reason or another, the money is not enough to hold election. There would
be chaos if no money is given as an aid, not to augment, but as an aid to a department like COA.
The President is responsible in a way that the other heads, given the power to augment, are not. So,
he cannot very well allow this, if Your Honor please. 189

JUSTICE LEONEN:

May I move to another point, maybe just briefly. I am curious that the position now, I think, of
government is that some transfers of savings is now considered to be, if I’m not mistaken, aid not
augmentation. Am I correct in my hearing of your argument?

HONORABLE MENDOZA:

That’s our submission, if Your Honor, please.

JUSTICE LEONEN:

May I know, Justice, where can we situate this in the text of the Constitution? Where do we actually
derive the concepts that transfers of appropriation from one branch to the other or what happened in
DAP can be considered a said? What particular text in the Constitution can we situate this?

HONORABLE MENDOZA:

There is no particular provision or statutory provision for that matter, if Your Honor please. It is drawn
from the fact that the Executive is the executive in-charge of the success of the government.

JUSTICE LEONEN:

So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of the
government?

HONORABLE MENDOZA:

Yes, if Your Honor, please.

JUSTICE LEONEN:

A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are
opportunities and there have been opportunities of the President to actually go to Congress and ask
for supplemental budgets?

HONORABLE MENDOZA:

If there is time to do that, I would say yes.

JUSTICE LEONEN:

So, the theory of aid rather than augmentation applies in extra-ordinary situation?

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HONORABLE MENDOZA:

Very extra-ordinary situations.

JUSTICE LEONEN:

But Counsel, this would be new doctrine, in case?

HONORABLE MENDOZA:

Yes, if Your Honor please. 190

Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of
Section 25(5), supra, disallowing cross border transfers was disobeyed. Cross-border transfers,
whether as augmentation, or as aid, were prohibited under Section 25(5), supra.

4.
Sourcing the DAP from unprogrammed
funds despite the original revenue targets
not having been exceeded was invalid

Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs for
2011, 2012,and 2013. The respondents stress, however, that the unprogrammed funds were not
brought under the DAP as savings, but as separate sources of funds; and that, consequently, the
release and use of unprogrammed funds were not subject to the restrictions under Section 25(5),
supra.

The documents contained in the Evidence Packets by the OSG have confirmed that the
unprogrammed funds were treated as separate sources of funds. Even so, the release and use of
the unprogrammed funds were still subject to restrictions, for, to start with, the GAAs precisely
specified the instances when the unprogrammed funds could be released and the purposes for
which they could be used.

The petitioners point out that a condition for the release of the unprogrammed funds was that the
revenue collections must exceed revenue targets; and that the release of the unprogrammed funds
was illegal because such condition was not met. 191

The respondents disagree, holding that the release and use of the unprogrammed funds under the
DAP were in accordance with the pertinent provisions of the GAAs. In particular, the DBM avers that
the unprogrammed funds could be availed of when any of the following three instances occur, to wit:
(1) the revenue collections exceeded the original revenue targets proposed in the BESFs submitted
by the President to Congress; (2) new revenues were collected or realized from sources not
originally considered in the BESFs; or(3) newly-approved loans for foreign assisted projects were
secured, or when conditions were triggered for other sources of funds, such as perfected loan
agreements for foreign-assisted projects.  This view of the DBM was adopted by all the respondents
192

in their Consolidated Comment. 193

The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed appropriations" as
appropriations that provided standby authority to incur additional agency obligations for priority PAPs
when revenue collections exceeded targets, and when additional foreign funds are
generated.  Contrary to the DBM’s averment that there were three instances when unprogrammed
194

466 | P a g e
funds could be released, the BESFs envisioned only two instances. The third mentioned by the DBM
– the collection of new revenues from sources not originally considered in the BESFs – was not
included. This meant that the collection of additional revenues from new sources did not warrant the
release of the unprogrammed funds. Hence, even if the revenues not considered in the BESFs were
collected or generated, the basic condition that the revenue collections should exceed the revenue
targets must still be complied with in order to justify the release of the unprogrammed funds.

The view that there were only two instances when the unprogrammed funds could be released was
bolstered by the following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:

2011 GAA

1. Release of Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution, including savings generated from
programmed appropriations for the year: PROVIDED, That collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds: PROVIDED,
FURTHERMORE, That if there are savings generated from the programmed appropriations for the
first two quarters of the year, the DBM may, subject to the approval of the President, release the
pertinent appropriations under the Unprogrammed Fund corresponding to only fifty percent (50%) of
the said savings net of revenue shortfall: PROVIDED, FINALLY, That the release of the balance of
the total savings from programmed appropriations for the year shall be subject to fiscal programming
and approval of the President.

2012 GAA

1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution: PROVIDED, That collections arising
from sources not considered in the aforesaid original revenue targets may be used to cover releases
from appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds.

As can be noted, the provisos in both provisions to the effect that "collections arising from sources
not considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund" gave the authority to use such additional revenues for appropriations
funded from the unprogrammed funds. They did not at all waive compliance with the basic
requirement that revenue collections must still exceed the original revenue targets.

In contrast, the texts of the provisos with regard to additional revenues generated from newly-
approved foreign loans were clear to the effect that the perfected loan agreement would be in itself
"sufficient basis" for the issuance of a SARO to release the funds but only to the extent of the
amount of the loan. In such instance, the revenue collections need not exceed the revenue targets to
warrant the release of the loan proceeds, and the mere perfection of the loan agreement would
suffice.

It can be inferred from the foregoing that under these provisions of the GAAs the additional revenues
from sources not considered in the BESFs must be taken into account in determining if the revenue

467 | P a g e
collections exceeded the revenue targets. The text of the relevant provision of the 2013 GAA, which
was substantially similar to those of the GAAs for 2011 and 2012, already made this explicit, thus:

1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution, including collections arising from
sources not considered in the aforesaid original revenue target, as certified by the BTr: PROVIDED,
That in case of newly approved loans for foreign-assisted projects, the existence of a perfected loan
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan
proceeds.

Consequently, that there were additional revenues from sources not considered in the revenue
target would not be enough. The total revenue collections must still exceed the original revenue
targets to justify the release of the unprogrammed funds (other than those from newly-approved
foreign loans).

The present controversy on the unprogrammed funds was rooted in the correct interpretation of the
phrase "revenue collections should exceed the original revenue targets." The petitioners take the
phrase to mean that the total revenue collections must exceed the total revenue target stated in the
BESF, but the respondents understand the phrase to refer only to the collections for each source of
revenue as enumerated in the BESF, with the condition being deemed complied with once the
revenue collections from a particular source already exceeded the stated target.

The BESF provided for the following sources of revenue, with the corresponding revenue target
stated for each source of revenue, to wit:

TAX REVENUES

Taxes on Net Income and Profits

Taxes on Property
Taxes on Domestic Goods and Services

General Sales, Turnover or VAT

Selected Excises on Goods

Selected Taxes on Services

Taxes on the Use of Goods or Property or Permission to Perform Activities
Other Taxes
Taxes on International Trade and Transactions

NON-TAX REVENUES

Fees and Charges

BTR Income

Government Services
Interest on NG Deposits
Interest on Advances to Government Corporations
Income from Investments

Interest on Bond Holdings

468 | P a g e
 Guarantee Fee
Gain on Foreign Exchange
NG Income Collected by BTr

Dividends on Stocks
NG Share from Airport Terminal Fee
NG Share from PAGCOR Income
NG Share from MIAA Profit

Privatization
Foreign Grants

Thus, when the Court required the respondents to submit a certification from the Bureau of Treasury
(BTr) to the effect that the revenue collections had exceeded the original revenue targets,  they
195

complied by submitting certifications from the BTr and Department of Finance (DOF) pertaining to
only one identified source of revenue – the dividends from the shares of stock held by the
Government in government-owned and controlled corporations.

To justify the release of the unprogrammed funds for 2011, the OSG presented the certification
dated March 4, 2011 issued by DOF Undersecretary Gil S. Beltran, as follows:

This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the
programmed income from dividends from shares of stock in government-owned and controlled
corporations is 5.5 billion.

This is to certify further that based on the records of the Bureau of Treasury, the National
Government has recorded dividend income amounting to ₱23.8 billion as of 31 January 2011. 196

For 2012, the OSG submitted the certification dated April 26, 2012 issued by National Treasurer
Roberto B. Tan, viz:

This is to certify that the actual dividend collections remitted to the National Government for the
period January to March 2012 amounted to ₱19.419 billion compared to the full year program of
₱5.5 billion for 2012. 197

And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by National
Treasurer Rosalia V. De Leon, to wit:

This is to certify that the actual dividend collections remitted to the National Government for the
period January to May 2013 amounted to ₱12.438 billion compared to the full year program of
₱10.0  billion for 2013.
198

Moreover, the National Government accounted for the sale of the right to build and operate the NAIA
expressway amounting to ₱11.0 billion in June 2013. 199

The certifications reflected that by collecting dividends amounting to ₱23.8 billion in 2011, ₱19.419
billion in 2012, and ₱12.438 billion in 2013 the BTr had exceeded only the ₱5.5 billion in target
revenues in the form of dividends from stocks in each of 2011 and 2012, and only the ₱10 billion in
target revenues in the form of dividends from stocks in 2013.

469 | P a g e
However, the requirement that revenue collections exceed the original revenue targets was to be
construed in light of the purpose for which the unprogrammed funds were incorporated in the GAAs
as standby appropriations to support additional expenditures for certain priority PAPs should the
revenue collections exceed the resource targets assumed in the budget or when additional foreign
project loan proceeds were realized. The unprogrammed funds were included in the GAAs to
provide ready cover so as not to delay the implementation of the PAPs should new or additional
revenue sources be realized during the year.  Given the tenor of the certifications, the
200

unprogrammed funds were thus not yet supported by the corresponding resources. 201

The revenue targets stated in the BESF were intended to address the funding requirements of the
proposed programmed appropriations. In contrast, the unprogrammed funds, as standby
appropriations, were to be released only when there were revenues in excess of what the
programmed appropriations required. As such, the revenue targets should be considered as a
whole, not individually; otherwise, we would be dealing with artificial revenue surpluses. The
requirement that revenue collections must exceed revenue target should be understood to mean that
the revenue collections must exceed the total of the revenue targets stated in the BESF. Moreover,
to release the unprogrammed funds simply because there was an excess revenue as to one source
of revenue would be an unsound fiscal management measure because it would disregard the budget
plan and foster budget deficits, in contravention of the Government’s surplus budget policy.
202

We cannot, therefore, subscribe to the respondents’ view.

5.
Equal protection, checks and balances,
and public accountability challenges

The DAP is further challenged as violative of the Equal Protection Clause, the system of checks and
balances, and the principle of public accountability.

With respect to the challenge against the DAP under the Equal Protection Clause,  Luna argues
203

that the implementation of the DAP was "unfair as it [was] selective" because the funds released
under the DAP was not made available to all the legislators, with some of them refusing to avail
themselves of the DAP funds, and others being unaware of the availability of such funds. Thus, the
DAP practised "undue favoritism" in favor of select legislators in contravention of the Equal
Protection Clause.

Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no
reasonable classification was used in distributing the funds under the DAP; and that the Senators
who supposedly availed themselves of said funds were differently treated as to the amounts they
respectively received.

Anent the petitioners’ theory that the DAP violated the system of checks and balances, Luna submits
that the grant of the funds under the DAP to some legislators forced their silence about the issues
and anomalies surrounding the DAP. Meanwhile, Belgica stresses that the DAP, by allowing the
legislators to identify PAPs, authorized them to take part in the implementation and execution of the
GAAs, a function that exclusively belonged to the Executive; that such situation constituted undue
and unjustified legislative encroachment in the functions of the Executive; and that the President
arrogated unto himself the power of appropriation vested in Congress because NBC No. 541
authorized the use of the funds under the DAP for PAPs not considered in the 2012 budget.

470 | P a g e
Finally, the petitioners insist that the DAP was repugnant to the principle of public accountability
enshrined in the Constitution,  because the legislators relinquished the power of appropriation to the
204

Executive, and exhibited a reluctance to inquire into the legality of the DAP.

The OSG counters the challenges, stating that the supposed discrimination in the release of funds
under the DAP could be raised only by the affected Members of Congress themselves, and if the
challenge based on the violation of the Equal Protection Clause was really against the
constitutionality of the DAP, the arguments of the petitioners should be directed to the entitlement of
the legislators to the funds, not to the proposition that all of the legislators should have been given
such entitlement.

The challenge based on the contravention of the Equal Protection Clause, which focuses on the
release of funds under the DAP to legislators, lacks factual and legal basis. The allegations about
Senators and Congressmen being unaware of the existence and implementation of the DAP, and
about some of them having refused to accept such funds were unsupported with relevant data. Also,
the claim that the Executive discriminated against some legislators on the ground alone of their
receiving less than the others could not of itself warrant a finding of contravention of the Equal
Protection Clause. The denial of equal protection of any law should be an issue to be raised only by
parties who supposedly suffer it, and, in these cases, such parties would be the few legislators
claimed to have been discriminated against in the releases of funds under the DAP. The reason for
the requirement is that only such affected legislators could properly and fully bring to the fore when
and how the denial of equal protection occurred, and explain why there was a denial in their
situation. The requirement was not met here. Consequently, the Court was not put in the position to
determine if there was a denial of equal protection. To have the Court do so despite the inadequacy
of the showing of factual and legal support would be to compel it to speculate, and the outcome
would not do justice to those for whose supposed benefit the claim of denial of equal protection has
been made.

The argument that the release of funds under the DAP effectively stayed the hands of the legislators
from conducting congressional inquiries into the legality and propriety of the DAP is speculative.
That deficiency eliminated any need to consider and resolve the argument, for it is fundamental that
speculation would not support any proper judicial determination of an issue simply because nothing
concrete can thereby be gained. In order to sustain their constitutional challenges against official
acts of the Government, the petitioners must discharge the basic burden of proving that the
constitutional infirmities actually existed.  Simply put, guesswork and speculation cannot overcome
205

the presumption of the constitutionality of the assailed executive act.

We do not need to discuss whether or not the DAP and its implementation through the various
circulars and memoranda of the DBM transgressed the system of checks and balances in place in
our constitutional system. Our earlier expositions on the DAP and its implementing issuances
infringing the doctrine of separation of powers effectively addressed this particular concern.

Anent the principle of public accountability being transgressed because the adoption and
implementation of the DAP constituted an assumption by the Executive of Congress’ power of
appropriation, we have already held that the DAP and its implementing issuances were policies and
acts that the Executive could properly adopt and do in the execution of the GAAs to the extent that
they sought to implement strategies to ramp up or accelerate the economy of the country.

6.
Doctrine of operative fact was applicable

471 | P a g e
After declaring the DAP and its implementing issuances constitutionally infirm, we must now deal
with the consequences of the declaration.

Article 7 of the Civil Code provides:

Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall
not be excused by disuse, or custom or practice to the contrary.

When the courts declared a law to be inconsistent with the Constitution, the former shall be void and
the latter shall govern.

Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution.

A legislative or executive act that is declared void for being unconstitutional cannot give rise to any
right or obligation.  However, the generality of the rule makes us ponder whether rigidly applying the
206

rule may at times be impracticable or wasteful. Should we not recognize the need to except from the
rigid application of the rule the instances in which the void law or executive act produced an almost
irreversible result?

The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has
been exhaustively explained in De Agbayani v. Philippine National Bank: 207

The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source
of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and purposes a mere scrap
of paper. As the new Civil Code puts it: ‘When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern.’ Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws of the Constitution.
It is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as until
after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative
or executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the governmental organ which has the
final say on whether or not a legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It
would be to deprive the law of its quality of fairness and justice then, if there be no recognition of
what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to
such a determination [of unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect
to particular relations, individual and corporate, and particular conduct, private and official.’"

472 | P a g e
The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that cannot
always be erased, ignored or disregarded. In short, it nullifies the void law or executive act but
sustains its effects. It provides an exception to the general rule that a void or unconstitutional law
produces no effect.  But its use must be subjected to great scrutiny and circumspection, and it
208

cannot be invoked to validate an unconstitutional law or executive act, but is resorted to only as a
matter of equity and fair play.  It applies only to cases where extraordinary circumstances exist, and
209

only when the extraordinary circumstances have met the stringent conditions that will permit its
application.

We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its
application to the DAP proceeds from equity and fair play. The consequences resulting from the
DAP and its related issuances could not be ignored or could no longer be undone.

To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act. The
term executive act is broad enough to include any and all acts of the Executive, including those that
are quasi legislative and quasi-judicial in nature. The Court held so in Hacienda Luisita, Inc. v.
Presidential Agrarian Reform Council: 210

Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine
should be limited to statutes and rules and regulations issued by the executive department that are
accorded the same status as that of a statute or those which are quasi-legislative in nature. Thus,
the minority concludes that the phrase ‘executive act’ used in the case of De Agbayani v. Philippine
National Bank refers only to acts, orders, and rules and regulations that have the force and effect of
law. The minority also made mention of the Concurring Opinion of Justice Enrique Fernando in
Municipality of Malabang v. Benito, where it was supposedly made explicit that the operative fact
doctrine applies to executive acts, which are ultimately quasi-legislative in nature.

We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case
elaborates what ‘executive act’ mean. Moreover, while orders, rules and regulations issued by the
President or the executive branch have fixed definitions and meaning in the Administrative Code and
jurisprudence, the phrase ‘executive act’ does not have such specific definition under existing laws.
It should be noted that in the cases cited by the minority, nowhere can it be found that the term
‘executive act’ is confined to the foregoing. Contrarily, the term ‘executive act’ is broad enough to
encompass decisions of administrative bodies and agencies under the executive department which
are subsequently revoked by the agency in question or nullified by the Court.

A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the
Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel
(CPLC) which was declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In
said case, this Court ruled that the concurrent appointment of Elma to these offices is in violation of
Section 7, par. 2, Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably,
the appointment of Elma as Chairman of the PCGG and as CPLC is, without a question, an
executive act. Prior to the declaration of unconstitutionality of the said executive act, certain acts or
transactions were made in good faith and in reliance of the appointment of Elma which cannot just
be set aside or invalidated by its subsequent invalidation.

In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of
the jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to
have existed so as not to trample upon the rights of the accused therein. Relevant thereto, in
Olaguer v. Military Commission No. 34, it was ruled that ‘military tribunals pertain to the Executive
Department of the Government and are simply instrumentalities of the executive power, provided by

473 | P a g e
the legislature for the President as Commander-in-Chief to aid him in properly commanding the army
and navy and enforcing discipline therein, and utilized under his orders or those of his authorized
military representatives.’

Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by
the executive department that are accorded the same status as that of a statute or those which are
quasi-legislative in nature.

Even assuming that De Agbayani initially applied the operative fact doctrine only to executive
issuances like orders and rules and regulations, said principle can nonetheless be applied, by
analogy, to decisions made by the President or the agencies under the executive department. This
doctrine, in the interest of justice and equity, can be applied liberally and in a broad sense to
encompass said decisions of the executive branch. In keeping with the demands of equity, the Court
can apply the operative fact doctrine to acts and consequences that resulted from the reliance not
only on a law or executive act which is quasi-legislative in nature but also on decisions or orders of
the executive branch which were later nullified. This Court is not unmindful that such acts and
consequences must be recognized in the higher interest of justice, equity and fairness.

Significantly, a decision made by the President or the administrative agencies has to be complied
with because it has the force and effect of law, springing from the powers of the President under the
Constitution and existing laws. Prior to the nullification or recall of said decision, it may have
produced acts and consequences in conformity to and in reliance of said decision, which must be
respected. It is on this score that the operative fact doctrine should be applied to acts and
consequences that resulted from the implementation of the PARC Resolution approving the SDP of
HLI. (Bold underscoring supplied for emphasis)

In Commissioner of Internal Revenue v. San Roque Power Corporation,  the Court likewise
211

declared that "for the operative fact doctrine to apply, there must be a ‘legislative or executive
measure,’ meaning a law or executive issuance." Thus, the Court opined there that the operative fact
doctrine did not apply to a mere administrative practice of the Bureau of Internal Revenue, viz:

Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the
time the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is
not given retroactive effect. This, in essence, is the doctrine of operative fact. There must, however,
be a rule or ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A
mere administrative practice, not formalized into a rule or ruling, will not suffice because such a mere
administrative practice may not be uniformly and consistently applied. An administrative practice, if
not formalized as a rule or ruling, will not be known to the general public and can be availed of only
by those with informal contacts with the government agency.

It is clear from the foregoing that the adoption and the implementation of the DAP and its related
issuances were executive acts.  The DAP itself, as a policy, transcended a merely administrative
1avvphi1

practice especially after the Executive, through the DBM, implemented it by issuing various
memoranda and circulars. The pooling of savings pursuant to the DAP from the allotments made
available to the different agencies and departments was consistently applied throughout the entire
Executive. With the Executive, through the DBM, being in charge of the third phase of the budget
cycle – the budget execution phase, the President could legitimately adopt a policy like the DAP by
virtue of his primary responsibility as the Chief Executive of directing the national economy towards
growth and development. This is simply because savings could and should be determined only
during the budget execution phase.

474 | P a g e
As already mentioned, the implementation of the DAP resulted into the use of savings pooled by the
Executive to finance the PAPs that were not covered in the GAA, or that did not have proper
appropriation covers, as well as to augment items pertaining to other departments of the
Government in clear violation of the Constitution. To declare the implementation of the DAP
unconstitutional without recognizing that its prior implementation constituted an operative fact that
produced consequences in the real as well as juristic worlds of the Government and the Nation is to
be impractical and unfair. Unless the doctrine is held to apply, the Executive as the disburser and the
offices under it and elsewhere as the recipients could be required to undo everything that they had
implemented in good faith under the DAP. That scenario would be enormously burdensome for the
Government. Equity alleviates such burden.

The other side of the coin is that it has been adequately shown as to be beyond debate that the
implementation of the DAP yielded undeniably positive results that enhanced the economic welfare
of the country. To count the positive results may be impossible, but the visible ones, like public
infrastructure, could easily include roads, bridges, homes for the homeless, hospitals, classrooms
and the like. Not to apply the doctrine of operative fact to the DAP could literally cause the physical
undoing of such worthy results by destruction, and would result in most undesirable wastefulness.

Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact
does not always apply, and is not always the consequence of every declaration of constitutional
invalidity. It can be invoked only in situations where the nullification of the effects of what used to be
a valid law would result in inequity and injustice;  but where no such result would ensue, the general
212

rule that an unconstitutional law is totally ineffective should apply.

In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the
PAPs that can no longer be undone, and whose beneficiaries relied in good faith on the validity of
the DAP, but cannot apply to the authors, proponents and implementors of the DAP, unless there
are concrete findings of good faith in their favor by the proper tribunals determining their criminal,
civil, administrative and other liabilities.

WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition; and
DECLARES the following acts and practices under the Disbursement Acceleration Program,
National Budget Circular No. 541 and related executive issuances UNCONSTITUTIONAL for being
in violation of Section 25(5), Article VI of the 1987 Constitution and the doctrine of separation of
powers, namely:

(a) The withdrawal of unobligated allotments from the implementing agencies, and the
declaration of the withdrawn unobligated allotments and unreleased appropriations as
savings prior to the end of the fiscal year and without complying with the statutory definition
of savings contained in the General Appropriations Acts;

(b) The cross-border transfers of the savings of the Executive to augment the appropriations
of other offices outside the Executive; and

(c) The funding of projects, activities and programs that were not covered by any
appropriation in the General Appropriations Act.

The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a
certification by the National Treasurer that the revenue collections exceeded the revenue targets for
non-compliance with the conditions provided in the relevant General Appropriations Acts.

SO ORDERED.

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476 | P a g e
 EN BANC

G.R. Nos. 217126-27, November 10, 2015

CONCHITA CARPIO MORALES, IN HER CAPACITY AS THE

OMBUDSMAN, Petitioner, v. COURT OF APPEALS (SIXTH DIVISION) AND
JEJOMAR ERWIN S. BINAY, JR., Respondents.

DECISION

PERLAS-BERNABE, J.:

"All government is a trust, every branch of government is a trust, and immemorially

acknowledged so to be[.]"1 ChanRoblesVirtualawlibrary

The Case

Before the Court is a petition for certiorari and prohibition2 filed on March 25, 2015 by

petitioner Conchita Carpio Morales, in her capacity as the Ombudsman (Ombudsman),
through the Office of the Solicitor General (OSG), assailing: (a) the Resolution3 dated
March 16, 2015 of public respondent the Court of Appeals (CA) in CA-G.R. SP No.
139453, which granted private respondent Jejomar Erwin S. Binay, Jr.'s (Binay, Jr.)
prayer for the issuance of a temporary restraining order (TRO) against the
implementation of the Joint Order4 dated March 10, 20,15 of the Ombudsman in OMB-
C-A-15-0058 to 0063 (preventive suspension order) preventively suspending him and
several other public officers and employees of the City Government of Makati, for six
(6) months without pay; and (b) the Resolution5 dated March 20, 2015 of the CA,
ordering the Ombudsman to comment on Binay, Jr.'s petition for contempt6 in CA-G.R.
SP No. 139504.

Pursuant to the Resolution7 dated April 6, 2015, the CA issued a writ of preliminary

injunction8 (WPI) in CA-G.R. SP No. 139453 which further enjoined the implementation
of the preventive suspension order, prompting the Ombudsman to file a supplemental
petition9 on April 13, 2015.

The Facts

On July 22, 2014, a complaint/affidavit10 was filed by Atty. Renato L. Bondal and Nicolas
"Ching" Enciso VI before the Office of the Ombudsman against Binay, Jr. and other
public officers and employees of the City Government of Makati (Binay, Jr.,  et al),
accusing them of Plunder11 and violation of Republic Act No. (RA) 3019,12 otherwise
known as "The Anti-Graft and Corrupt Practices Act," in connection with the five (5)
phases of the procurement and construction of the Makati City Hall Parking Building
(Makati Parking Building).13

On September 9, 2014, the Ombudsman constituted a Special Panel of

Investigators14 to conduct a fact-finding investigation, submit an investigation report,
and file the necessary complaint, if warranted (1st Special Panel).15 Pursuant to the

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Ombudsman's directive, on March 5, 2015, the 1st Special Panel filed a
complaint16 (OMB Complaint) against Binay, Jr., et al, charging them with six (6)
administrative cases17 for Grave Misconduct, Serious Dishonesty, and Conduct
Prejudicial to the Best Interest of the Service, and six (6) criminal cases18 for violation
of Section 3 (e) of RA 3019, Malversation of Public Funds, and Falsification of Public
Documents (OMB Cases).19

As to Binay, Jr., the OMB Complaint alleged that he was involved in anomalous
activities attending the following procurement and construction phases of the Makati
Parking Building project, committed during his previous and present terms as City
Mayor of Makati:

Binay, Jr.'s First Term (2010 to 2013)20

(a) On September 21, 2010, Binay, Jr. issued the Notice of Award21 for Phase III of
the Makati Parking Building project to Hilmarc's Construction Corporation (Hilmarc's),
and consequently, executed the corresponding contract22 on September 28,
2010,23 without the required publication and the lack of architectural design,24 and
approved the release of funds therefor in the following amounts as follows: (1)
P130,518,394.80 on December 15, 2010;25 (2) P134,470,659.64 on January 19,
2011;26 (3) P92,775,202.27 on February 25, 2011;27 (4) P57,148,625.51 on March
28, 2011;28 (5) P40,908,750.61 on May 3, 2011;29 and (6) P106,672,761.90 on July
7, 2011;30

(b) On August 11, 2011, Binay, Jr. issued the Notice of Award31 for Phase IV of the
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract32 on August 18, 2011,33 without the required publication and the
lack of architectural design,34 and approved the release of funds therefor in the
following amounts as follows: (1) P182,325,538.97 on October 4, 2O11;35 (2)
P173,132,606.91 on October 28,2011;36 (3) P80,408,735.20 on December 12,
2011;37 (4) P62,878,291.81 on February 10, 2012;38 and (5) P59,639,167.90 on
October 1, 2012;39

(c) On September 6, 2012, Binay, Jr. issued the Notice of Award40 for Phase V of the
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract41 on September 13, 2012,42 without the required publication and
the lack of architectural design,43 and approved the release of the funds therefor in the
amounts of P32,398,220.0544 and P30,582,629.3045 on December 20, 2012;  and

Binay, Jr.'s Second Term (2013 to 2016)46

(d) On July 3, 2013 and July 4, 2013, Binay, Jr. approved the release of funds for the
remaining balance of the September 13, 2012 contract with Hilmarc's for Phase V of the
Makati Parking Building project in the amount of P27,443,629.97;47 and

(e) On July 24, 2013, Binay, Jr. approved the release of funds for the remaining
balance of the contract48 with MANA Architecture & Interior Design Co. (MANA) for the
design and architectural services covering the Makati Parking Building project in the
amount of P429,011.48.49

On March 6, 2015, the Ombudsman created another Special Panel of Investigators to

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conduct a preliminary investigation and administrative adjudication on the OMB Cases
(2nd Special Panel).50 Thereafter, on March 9, 2015, the 2nd Special Panel issued
separate orders51 for each of the OMB Cases, requiring Binay, Jr., et al. to file their
respective counter-affidavits.52

Before Binay, Jr.,  et al.'s filing of their counter-affidavits, the Ombudsman, upon the
recommendation of the 2nd Special Panel, issued on March 10, 2015, the subject
preventive suspension order, placing Binay, Jr.,  et al. under preventive suspension for
not more than six (6) months without pay, during the pendency of the OMB
Cases.53 The Ombudsman ruled that the requisites for the preventive suspension of a
public officer are present,54 finding that: (a) the evidence of Binay, Jr., et al.'s guilt was
strong given that (1) the losing bidders and members of the Bids and Awards
Committee of Makati City had attested to the irregularities attending the Makati Parking
Building project; (2) the documents on record negated the publication of bids; and (3)
the disbursement vouchers, checks, and official receipts showed the release of funds;
and (b) (1) Binay, Jr., et al. were administratively charged with Grave Misconduct,
Serious Dishonesty, and Conduct Prejudicial to the Best Interest of the Service; (2) said
charges, if proven to be true, warrant removal from public service under the Revised
Rules on Administrative Cases in the Civil Service (RRACCS), and (3) Binay, Jr., et al.'s
respective positions give them access to public records and allow them to influence
possible witnesses; hence, their continued stay in office may prejudice the investigation
relative to the OMB Cases filed against them.55 Consequently, the Ombudsman directed
the Department of Interior and Local Government (DILG), through Secretary Manuel A.
Roxas II (Secretary Roxas), to immediately implement the preventive suspension order
against Binay, Jr., et al., upon receipt of the same.56

On March 11, 2015, a copy of the preventive suspension order was sent to the Office of
the City Mayor, and received by Maricon Ausan, a member of Binay, Jr.'s staff.57

The Proceedings Before the CA

On even date,58 Binay, Jr. filed a petition for certiorari59 before the CA, docketed as CA-
G.R. SP No. 139453, seeking the nullification of the preventive suspension order, and
praying for the issuance of a TRO and/or WPI to enjoin its implementation.60Primarily,
Binay, Jr. argued that he could not be held administratively liable for any
anomalous activity attending any of the five (5) phases of the Makati Parking Building
project since: (a) Phases I and II were undertaken before he was elected Mayor of
Makati in 2010; and (b) Phases III to V transpired during his first term and that his re-
election as City Mayor of Makati for a second term effectively condoned his
administrative liability therefor, if any, thus rendering the administrative cases
against him moot and academic.61In any event, Binay, Jr. claimed that the
Ombudsman's preventive suspension order failed to show that the evidence of
guilt presented against him is strong, maintaining that he did not participate in any
of the purported irregularities.62 In support of his prayer for injunctive relief, Binay, Jr.
argued that he has a clear and unmistakable right to hold public office, having won by
landslide vote in the 2010 and 2013 elections, and that, in view of the condonation
doctrine, as well as the lack of evidence to sustain the charges against him, his
suspension from office would undeservedly deprive the electorate of the services of the
person they have conscientiously chosen and voted into office.63

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On March 16, 2015, at around 8:24 a.m., Secretary Roxas caused the implementation
of the preventive suspension order through the DILG National Capital Region - Regional
Director, Renato L. Brion, CESO III (Director Brion), who posted a copy thereof on the
wall of the Makati City Hall after failing to personally serve the same on Binay, Jr. as
the points of entry to the Makati City Hall were closed. At around 9:47 a.m., Assistant
City Prosecutor of Makati Billy C. Evangelista administered the oath of office on Makati
City Vice Mayor Romulo V. Peña, Jr. (Peña, Jr.) who thereupon assumed office as Acting
Mayor.64

At noon of the same day, the CA issued a Resolution65 (dated March 16, 2015), granting
Binay, Jr.'s prayer for a TRO,66 notwithstanding Pena, Jr.'s assumption of duties as
Acting Mayor earlier that day.67 Citing the case of Governor Garcia, Jr. v. CA,68 the CA
found that it was more prudent on its part to issue a TRO in view of the extreme
urgency of the matter and seriousness of the issues raised, considering that if it were
established that the acts subject of the administrative cases against Binay, Jr. were all
committed during his prior term, then, applying the condonation doctrine, Binay, Jr.'s
re-election meant that he can no longer be administratively charged.69 The CA then
directed the Ombudsman to comment on Binay, Jr.'s petition for certiorari .70

On March 17, 2015, the Ombudsman manifested71 that the TRO did not state what act
was being restrained and that since the preventive suspension order had already been
served and implemented, there was no longer any act to restrain.72

On the same day, Binay, Jr. filed a petition for contempt,73  docketed as CA-G.R. SP
No. 139504, accusing Secretary Roxas, Director Brion, the officials of the Philippine
National Police, and Pena, Jr. of deliberately refusing to obey the CA, thereby allegedly
impeding, obstructing, or degrading the administration of justice.74 The Ombudsman
and Department of Justice Secretary Leila M. De Lima were subsequently impleaded as
additional respondents upon Binay, Jr.'s filing of the amended and supplemental
petition for contempt75 (petition for contempt) on March 19, 2015.76 Among others,
Binay, Jr. accused the Ombudsman and other respondents therein for willfully and
maliciously ignoring the TRO issued by the CA against the preventive suspension
order.77

In a Resolution78dated March 20, 2015, the CA ordered the consolidation of CA-G.R.

SP No. 139453 and CA-G.R. SP No. 139504, and, without necessarily giving due
course to Binay, Jr.'s petition for contempt, directed the Ombudsman to file her
comment thereto.79 The cases were set for hearing of oral arguments on March 30 and
31, 2015.80

The Proceedings Before the Court

Prior to the hearing of the oral arguments before the CA, or on March 25, 2015, the
Ombudsman filed the present petition before this Court, assailing the CA's March 16,
2015 Resolution, which granted Binay, Jr.'s prayer for TRO in CA-G.R. SP No. 139453,
and the March 20, 2015 Resolution directing her to file a comment on Binay, Jr.'s
petition for contempt in CA-G.R. SP No. 139504.81 The Ombudsman claims that: (a) the
CA had no jurisdiction to grant Binay, Jr.'s prayer for a TRO, citing Section 14 of RA
6770,82 or "The Ombudsman Act of 1989," which states that no injunctive writ could be
issued to delay the Ombudsman's investigation unless there is prima facie evidence

480 | P a g e
that the subject matter thereof is outside the latter's jurisdiction;83 and (b) the CA's
directive for the Ombudsman to comment on Binay, Jr.'s petition for contempt is illegal
and improper, considering that the Ombudsman is an impeachable officer, and
therefore, cannot be subjected to contempt proceedings.84

In his comment85 filed on April 6, 2015, Binay, Jr. argues that Section 1, Article VIII of
the 1987 Constitution specifically grants the CA judicial power to review acts of any
branch or instrumentality of government, including the Office of the Ombudsman, in
case of grave abuse of discretion amounting to lack or excess of jurisdiction, which he
asserts was committed in this case when said office issued the preventive suspension
order against him.86 Binay, Jr. posits that it was incumbent upon the Ombudsman to1
have been apprised of the condonation doctrine as this would have weighed heavily in
determining whether there was strong evidence to warrant the issuance of the
preventive suspension order.87 In this relation, Binay, Jr. maintains that the CA
correctly enjoined the implementation of the preventive suspension order given his
clear and unmistakable right to public office, and that it is clear that he could not be
held administratively liable for any of the charges against him since his subsequent re-
election in 2013 operated as a condonation of any administrative offenses he may have
committed during his previous term.88 As regards the CA's order for the Ombudsman to
comment on his petition for contempt, Binay, Jr. submits that while the Ombudsman is
indeed an impeachable officer and, hence, cannot be removed from office except by
way of impeachment, an action for contempt imposes the penalty of fine and
imprisonment, without necessarily resulting in removal from office. Thus, the fact that
the Ombudsman is an impeachable officer should not deprive the CA of its inherent
power to punish contempt.89

Meanwhile, the CA issued a Resolution90 dated April 6, 2015, after the oral

arguments before it were held,91 granting Binay, Jr.'s prayer for a WPI, which further
enjoined the implementation of the preventive suspension order. In so ruling, the CA
found that Binay, Jr. has an ostensible right to the final relief prayed for, namely, the
nullification of the preventive suspension order, in view of the condonation doctrine,
citing Aguinaldo v. Santos.92 Particularly, it found that the Ombudsman can hardly
impose preventive suspension against Binay, Jr. given that his re-election in 2013 as
City Mayor of Makati condoned any administrative liability arising from anomalous
activities relative to the Makati Parking Building project from 2007 to 2013.93 In this
regard, the CA added that, although there were acts which were apparently committed
by Binay, Jr. beyond his first term — namely, the alleged payments on July 3, July 4,
and July 24, 2013,94 corresponding to the services of Hillmarc's and MANA - still, Binay,
Jr. cannot be held administratively liable therefor based on the cases of Salalima v.
Guingona, Jr.,95 and Mayor Garcia v. Mojica96 wherein the condonation doctrine was
still applied by the Court although the payments were made after the official's re-
election, reasoning that the payments were merely effected pursuant to contracts
executed before said re-election.97 To this, the CA added that there was no concrete
evidence of Binay, Jr.'s participation for the alleged payments made on July 3, 4, and
24, 2013.98

In view of the CA's supervening issuance of a WPI pursuant to its April 6, 2015
Resolution, the Ombudsman filed a supplemental petition99 before this Court, arguing
that the condonation doctrine is irrelevant to the determination of whether the evidence
of guilt is strong for purposes of issuing preventive suspension orders. The Ombudsman

481 | P a g e
also maintained that a reliance on the condonation doctrine is a matter of defense,
which should have been raised by Binay, Jr. before it during the administrative
proceedings, and that, at any rate, there is no condonation because Binay, Jr.
committed acts subject of the OMB Complaint after his re-election in 2013.100

On April 14 and 21, 2015,101 the Court conducted hearings for the oral arguments of the
parties. Thereafter, they were required to file their respective memoranda.102 In
compliance thereto, the Ombudsman filed her Memorandum103 on May 20, 2015, while
Binay, Jr. submitted his Memorandum the following day.104

Pursuant to a Resolution105 dated June 16, 2015, the Court directed the parties to
comment on each other's memoranda, and the OSG to comment on the Ombudsman's
Memorandum, all within ten (10) days from receipt of the notice.

On July 15, 2015, both parties filed their respective comments to each other's
memoranda.106 Meanwhile, on July 16, 2015, the OSG filed its Manifestation In Lieu of
Comment,107 simply stating that it was mutually agreed upon that the Office of the
Ombudsman would file its Memorandum, consistent with its desire to state its
"institutional position."108 In her Memorandum and Comment to Binay, Jr.'s
Memorandum, the Ombudsman pleaded, among others, that this Court abandon the
condonation doctrine.109 In view of the foregoing, the case was deemed submitted for
resolution. chanrobleslaw

The Issues Before the Court

Based on the parties' respective pleadings, and as raised during the oral arguments
conducted before this Court, the main issues to be resolved in seriatim are as follows:

I. Whether or not the present petition, and not motions for reconsideration
of the assailed CA issuances in CA-G.R. SP No. 139453 and CA-G.R. SP
No. 139504, is the Ombudsman's plain, speedy, and adequate remedy; cralawlawlibrary

II. Whether or not the CA has subject matter jurisdiction over the main
petition for certiorari in CA-G.R. SP No. 139453; cralawlawlibrary

III. Whether or not the CA has subject matter jurisdiction to issue a TRO
and/or WPI enjoining the implementation of a preventive suspension
order issued by the Ombudsman; cralawlawlibrary

IV. Whether or not the CA gravely abused its discretion in issuing the TRO
and eventually, the WPI in CA-G.R. SP No. 139453 enjoining the
implementation of the preventive suspension order against Binay, Jr.
based on the condonation doctrine; and
V. Whether or not the CA's directive for the Ombudsman to ' comment on
Binay, Jr.'s petition for contempt in CA- G.R. SP No. 139504 is improper
and illegal.

The Ruling of the Court

The petition is partly meritorious. chanrobleslaw

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 I.

A common requirement to both a petition for certiorari and a petition for prohibition

taken under Rule 65 of the 1997 Rules of Civil Procedure is that the petitioner has no
other plain, speedy, and adequate remedy in the ordinary course of law. Sections 1 and
2 thereof provide:

Section 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, nor any plain, speedy, and adequate remedy in the ordinary course
of law, a person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

xxxx

Section 2. Petition for prohibition. - When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any
other plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts r with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter specified therein,
or otherwise granting such incidental reliefs as law and justice may require.

x x x x (Emphases supplied)

Hence, as a general rule, a motion for reconsideration must first be filed with the lower
court prior to resorting to the extraordinary remedy of certiorari or prohibition since a
motion for reconsideration may still be considered as a plain, speedy, and adequate
remedy in the ordinary course of law. The rationale for the pre-requisite is to grant an
opportunity for the lower court or agency to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of the
case.110

Jurisprudence states that "[i]t is [the] inadequacy, [and] not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must
usually determine the propriety of certiorari [or prohibition]. A remedy is plain,
speedy[,] and adequate if it will promptly relieve the petitioner from the injurious
effects of the judgment, order, or resolution of the lower court or agency, x x x."111

In this light, certain exceptions were crafted to the general rule requiring a prior motion
for reconsideration before the filing of a petition for certiorari, which exceptions also
apply to a petition for prohibition.112 These are: (a) where the order is a patent nullity,
as where the court a quo has no jurisdiction; (b) where the questions raised in
the certiorari proceedings have been duly raised and passed upon by the lower court, or
are the same as those raised and passed upon in the lower court; (c) where there is an

483 | P a g e
urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of
the action is perishable; (d) where, under the circumstances, a motion for
reconsideration would be useless; (e) where petitioner was deprived of due process and
there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of
arrest is urgent and the granting of such relief by the trial court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where
the proceedings were ex parte  or in which the petitioner had no opportunity to object;
and (i) where the issue raised is one purely of law or where public interest is
involved.113

In this case, it is ineluctably clear that the above-highlighted exceptions attend since,
for the first time, the question on the authority of the CA - and of this Court, for that
matter - to enjoin the implementation of a preventive suspension order issued by the
Office of the Ombudsman is put to the fore. This case tests the constitutional and
statutory limits of the fundamental powers of key government institutions - namely, the
Office of the Ombudsman, the Legislature, and the Judiciary - and hence, involves an
issue of transcendental public importance that demands no less than a careful but
expeditious resolution. Also raised is the equally important issue on the propriety of the
continuous application of the condonation doctrine as invoked by a public officer who
desires exculpation from administrative liability. As such, the Ombudsman's direct
resort to certiorari and prohibition before this Court, notwithstanding her failure to
move for the prior reconsideration of the assailed issuances in CA-G.R. SP No. 139453
and CA-G.R. SP No. 139504 before the CA, is justified. chanrobleslaw

II.

Albeit raised for the first time by the Ombudsman in her Memorandum,114 it is
nonetheless proper to resolve the issue on the CA's lack of subject matter jurisdiction
over the main petition for certiorari in CA-G.R. SP No. 139453, in view of the well-
established rule that a court's jurisdiction over the subject matter may be raised at any
stage of the proceedings. The rationale is that subject matter jurisdiction is conferred
by law, and the lack of it affects the very authority of the court to take cognizance of
and to render judgment on the action.115 Hence, it should be preliminarily determined if
the CA indeed had subject matter jurisdiction over the main CA-G.R. SP No. 139453
petition, as the same determines the validity of all subsequent proceedings relative
thereto. It is noteworthy to point out that Binay, Jr. was given the opportunity by this
Court to be heard on this issue,116 as he, in fact, duly submitted his opposition through
his comment to the Ombudsman's Memorandum.117 That being said, the Court
perceives no reasonable objection against ruling on this issue.

The Ombudsman's argument against the CA's lack of subject matter jurisdiction over
the main petition, and her corollary prayer for its dismissal, is based on her
interpretation of Section 14, RA 6770, or the Ombudsman Act,118 which reads in full:

Section 14. Restrictions. - No writ of injunction shall be issued by any court to delay an
investigation being conducted by the Ombudsman under this Act, unless there is
a prima facie evidence that the subject matter of the investigation is outside the
jurisdiction of the Office of the Ombudsman.

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No court shall hear any appeal or application for remedy against the decision or findings
of the Ombudsman, except the Supreme Court, on pure question of law.

The subject provision may be dissected into two (2) parts.

The first paragraph of Section 14, RA 6770 is a prohibition against any court

(except the Supreme Court119) from issuing a writ of injunction to delay an investigation
being conducted by the Office of the Ombudsman. Generally speaking, "[injunction is a
judicial writ, process or proceeding whereby a party is ordered to do or refrain from
doing a certain act. It may be the main action or merely a provisional remedy for and
as an incident in the main action."120 Considering the textual qualifier "to delay," which
connotes a suspension of an action while the main case remains pending, the "writ of
injunction" mentioned in this paragraph could only refer to injunctions of the provisional
kind, consistent with the nature of a provisional injunctive relief.

The exception to the no injunction policy is when there is prima facie evidence that the
subject matter of the investigation is outside the office's jurisdiction. The Office of the
Ombudsman has disciplinary authority over all elective and appointive officials of the
government and its subdivisions, instrumentalities, and agencies, with the exception
only of impeachable officers, Members of Congress, and the Judiciary.121 Nonetheless,
the Ombudsman retains the power to investigate any serious misconduct in office
allegedly committed by officials removable by impeachment, for the purpose of filing a
verified complaint for impeachment, if warranted.122 Note that the Ombudsman has
concurrent jurisdiction over certain administrative cases which are within the
jurisdiction of the regular courts or administrative agencies, but has primary jurisdiction
to investigate any act or omission of a public officer or employee who is under the
jurisdiction of the Sandiganbayan.123

On the other hand, the second paragraph of Section 14, RA 6770 provides that no

appeal or application for remedy may be heard against the decision or findings of the
Ombudsman, with the exception of the Supreme Court on pure questions of law. This
paragraph, which the Ombudsman particularly relies on in arguing that the CA had no
jurisdiction over the main CA-G.R. SP No. 139453 petition, as it is supposedly this Court
which has the sole jurisdiction to conduct a judicial review of its decisions or findings, is
vague for two (2) reasons: (1) it is unclear what the phrase "application for remedy" or
the word "findings" refers to; and (2) it does not specify what procedural remedy is
solely allowable to this Court, save that the same be taken only against a pure question
of law. The task then, is to apply the relevant principles of statutory construction to
resolve the ambiguity.

"The underlying principle of all construction is that the intent of the legislature should
be sought in the words employed to express it, and that when found[,] it should be
made to govern, x x x. If the words of the law seem to be of doubtful import, it may
then perhaps become necessary to look beyond them in order to ascertain what was in
the legislative mind at the time the law was enacted; what the circumstances were,
under which the action was taken; what evil, if any, was meant to be redressed; x x x
[a]nd where the law has contemporaneously been put into operation, and in doing so a
construction has necessarily been put upon it, this construction, especially if followed
for some considerable period, is entitled to great respect, as being very probably a true
expression of the legislative purpose, and is not lightly to be overruled, although it is

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not conclusive."124

As an aid to construction, courts may avail themselves of the actual proceedings of the
legislative body in interpreting a statute of doubtful meaning. In case of doubt as to
what a provision of a statute means, the meaning put to the provision during the
legislative deliberations may be adopted,125 albeit not controlling in the interpretation of
the law.126

A. The Senate deliberations cited by the

Ombudsman do not pertain to the second
paragraph of Section 14, RA 6770.

The Ombudsman submits that the legislative intent behind Section 14, RA 6770,
particularly on the matter of judicial review of her office's decisions or findings, is
supposedly clear from the following Senate deliberations:127

Senator [Edgardo J.] Angara, x x x. On page 15, Mr. President, line 14, after the
phrase "petition for" delete the word "review" and in lieu thereof, insert the
word CERTIORARI. So that, review or appeal from the decision of the Ombudsman
would only be taken not on a petition for review, but on certiorari.

The President [Jovito R. Salonga]. What is the practical effect of that? Will it

be more difficult to reverse the decision under review?

Senator Angara. It has two practical effect ways, Mr. President. First is that the
findings of facts of the Ombudsman would be almost conclusive if supported
by substantial evidence. Second, we would not unnecessarily clog the docket
of the Supreme Court. So, it in effect will be a  very strict appeal procedure.

xxxx

Senator [Teofisto T.] Guingona, [Jr.]. Does this mean that, for example, if there are
exhaustive remedies available to a respondent, the respondent himself has the right to
exhaust the administrative remedies available to him?

Senator Angara. Yes, Mr. President, that is correct.

Senator Guingona. And he himself may cut the proceeding short by appealing to
the Supreme Court only on  certiorari  ?

Senator Angara. On question of law, yes.

Senator Guingona. And no other remedy is available to him?

Senator Angara. Going to the Supreme Court, Mr. President?

Senator Guingona. Yes. What I mean to say is, at what stage, for example, if he is a
presidential appointee who is the respondent, if there is f no certiorari available, is the
respondent given the right to exhaust his administrative remedies first before the
Ombudsman can take the appropriate action?

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Senator Angara. Yes, Mr. President, because we do not intend to change the
administrative law principle that before one can go to court, he must exhaust all
administrative remedies xxx available to him before he goes and seeks judicial review.

xxxx

Senator [Neptali A.] Gonzales. What is the purpose of the Committee in

changing the method of appeal from one of a petition for review to a petition
for certiorari  ?

Senator Angara. To make it consistent, Mr. President, with the provision here
in the bill to the effect that the  finding of facts of the Ombudsman is
conclusive if supported by substantial evidence.

Senator Gonzales. A statement has been made by the Honorable Presiding Officer to
which I concur, that in an appeal by certiorari  , the appeal is more difficult.
Because in certiorari  it is a matter of discretion on the part of the court,
whether to give due course to the petition or dismiss it outright. Is that not
correct, Mr. President?

Senator Angara. That is absolutely correct, Mr. President

Senator Gonzales. And in a petition for certiorari  , the issue is  limited to

whether or not the Ombudsman here has acted without jurisdiction and has
committed a grave abuse of discretion amounting to lack of jurisdiction. Is that
not the consequence, Mr. President.

Senator Angara. That is correct, Mr. President.

Senator Gonzales. And it is, therefore, in this sense that the intention of the
Committee is to make it harder to have a judicial review, but should be limited
only to cases that I have enumerated.

Senator Angara. Yes, Mr. President.

Senator Gonzales. I think, Mr. President, our Supreme Court has made a distinction
between a petition for review and a petition for certiorari ; because before, under the
1935 Constitution appeal from any order, ruling or decision of the COMELEC shall be by
means of review. But under the Constitution it is now by certiorari and the Supreme
Court said that by this change, the court exercising judicial review will not inquire into
the facts, into the evidence, because we will not go deeply by way of review into the
evidence on record but its authority will be limited to a determination of whether the
administrative agency acted without, or in excess of, jurisdiction, or committed a grave
abuse of discretion. So, I assume that that is the purpose of this amendment, Mr.
President.

Senator Angara. The distinguished Gentleman has stated it so well.

Senator Gonzales. I just want to put that in the Record. Senator Angara. It is very

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well stated, Mr. President.

xxxx

The President.  It is evident that there must be some final authority to render
decisions. Should it be the Ombudsman or should it be the Supreme Court?

Senator Angara. As I understand it, under our scheme of government, Mr.

President, it is and has to be the Supreme Court to make the final
determination.

The President. Then if that is so, we have to modify Section 17.

Senator Angara. That is why, Mr. President, some of our Colleagues have made a
reservation to introduce an appropriate change during the period of Individual
Amendments.

xxxx

The President. All right. Is there any objection to the amendment inserting the
word CERTIORARI instead of "review"? [Silence] Hearing none, the same is approved.128

Upon an assiduous scrutiny of these deliberations, the Court is, however, unconvinced
that the provision debated on was Section 14, RA 6770, as the Ombudsman invokes.
Note that the exchange begins with the suggestion of Senator Angara to delete the
word "review" that comes after the phrase "petition for review" and, in its stead, insert
the word "certiorari" so that the "review or appeal from the decision of the Ombudsman
would not only be taken on a petition for review, but on certiorari" The ensuing
exchange between Senators Gonzales and Angara then dwells on the purpose of
changing the method of review from one of a petition for review to a petition
for certiorari - that is, to make "the appeal x x x more difficult." Ultimately, the
amendment to the change in wording, from "petition for review" to "petition
for certiorari" was approved.

Noticeably, these references to a "petition for review" and the proposed "petition
for certiorari" are nowhere to be found in the text of Section 14, RA 6770. In fact, it
was earlier mentioned that this provision, particularly its second paragraph, does not
indicate what specific procedural remedy one should take in assailing a decision or
finding of the Ombudsman; it only reveals that the remedy be taken to this Court based
on pure questions of law. More so, it was even commented upon during the oral
arguments of this case129 that there was no debate or clarification made on the current
formulation of the second paragraph of Section 14, RA 6770 per the available excerpts
of the Senate deliberations. In any case, at least for the above-cited deliberations, the
Court finds no adequate support to sustain the Ombudsman's entreaty that the CA had
no subject matter jurisdiction over the main CA-G.R. SP No. 139453 petition.

On the contrary, it actually makes greater sense to posit that these deliberations refer
to another Ombudsman Act provision, namely Section 27, RA 6770. This is because the
latter textually reflects the approval of Senator Angara's suggested amendment, i.e.,
that the Ombudsman's decision or finding may be assailed in a petition for certiorari to

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this Court (fourth paragraph), and further, his comment on the conclusive nature of the
factual findings of the Ombudsman, if supported by substantial evidence (third
paragraph):

Section 27. Effectivity and Finality of Decisions.— (1) All provisionary orders of the

Office of the Ombudsman are immediately effective and executory.

A motion for reconsideration of any order, directive or decision of the Office of the
Ombudsman must be filed within five (5) days after receipt of written notice and shall
be entertained only on any of the following grounds: chanRoblesvirtualLawlibrary

(1) New evidence has been discovered which materially affects the order, directive or
decision; cralawlawlibrary

(2) Errors of law or irregularities have been committed prejudicial to the interest of the
movant. The motion for reconsideration shall be resolved within three (3) days from
filing: Provided, That only one motion for reconsideration shall be entertained. ChanRoblesVirtualawlibrary

Findings of fact by the Office of the Ombudsman when supported by substantial

evidence are conclusive. Any order, directive or decision imposing the penalty of public
censure or reprimand, suspension of not more than one (1) month's salary shall be final
and unappealable.

In all administrative disciplinary cases, orders, directives, or decisions of the

Office of the Ombudsman may be appealed to the Supreme Court by filing
a petition for certiorari within ten (10) days from receipt of the written notice
of the order, directive or decision or denial of the motion for reconsideration in
accordance with Rule 45 of the Rules of Court.

The above rules may be amended or modified by the Office of the ' Ombudsman as the
interest of justice may require. (Emphasis and underscoring supplied)

At first blush, it appears that Section 27, RA 6770 is equally ambiguous in stating that a
"petition for certiorari" should be taken in accordance with Rule 45 of the Rules of
Court, as it is well-known that under the present 1997 Rules of Civil Procedure,
petitions for certiorari are governed by Rule 65 of the said Rules. However, it should be
discerned that the Ombudsman Act was passed way back in 1989130 and, hence, before
the advent of the 1997 Rules of Civil Procedure.131 At that time, the governing 1964
Rules of Court,132 consistent with Section 27, RA 6770, referred to the appeal taken
thereunder as a petition for certiorari , thus possibly explaining the remedy's textual
denomination, at least in the provision's final approved version:

RULE 45
Appeal from Court of Appeals to Supreme Court

SECTION 1. Filing of Petition with Supreme Court. - A party may appeal by certiorari ,
from a judgment of the Court of Appeals, by filing with the Supreme Court a petition
for certiorari  , within fifteen (15) days from notice of judgment or of the denial of his
motion for reconsideration filed in due time, and paying at the same time, to the clerk
of said court the corresponding docketing fee. The petition shall not be acted upon
without proof of service of a copy thereof to the Court of Appeals. (Emphasis supplied)

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B. Construing the second paragraph of
Section 14, RA 6770.

The Senate deliberations' lack of discussion on the second paragraph of Section 14, RA
6770 notwithstanding, the other principles of statutory construction can apply to
ascertain the meaning of the provision.

To recount, the second paragraph of Section 14, RA 6770 states that "[n]o court shall
hear any appeal or application for remedy against the decision or findings of
the Ombudsman, except the Supreme Court, on pure question of law."    ; cralawlawlibrary

As a general rule, the second paragraph of Section 14, RA 6770 bans the whole
range of remedies against issuances of the Ombudsman, by prohibiting: (a) an
appeal against any decision or finding of the Ombudsman, and (b) "any application of
remedy" (subject to the exception below) against the same. To clarify, the phrase
"application for remedy," being a generally worded provision, and being separated from
the term "appeal" by the disjunctive "or",133 refers to any remedy (whether taken
mainly or provisionally), except an appeal, following the maxim generalia verba sunt
generaliter intelligenda: general words are to be understood in a general sense.134 By
the same principle, the word "findings," which is also separated from the word
"decision" by the disjunctive "or", would therefore refer to any finding made by the
Ombudsman (whether final or provisional), except a decision.

The subject provision, however, crafts an exception to the foregoing general rule.
While the specific procedural vehicle is not explicit from its text, it is fairly deducible
that the second paragraph of Section 14, RA 6770 excepts, as the only allowable
remedy against "the decision or findings of the Ombudsman," a Rule 45 appeal, for
the reason that it is the only remedy taken to the Supreme Court on "pure
questions of law," whether under the 1964 Rules of Court or the 1997 Rules of Civil
Procedure:

Rule 45, 1964 Rules of Court

RULE 45
Appeal from Court of Appeals to Supreme Court

xxxx

Section 2. Contents of Petition. — The petition shall contain a concise statement of the
matters involved, the assignment of errors made in the court below, and the reasons
relied on for the allowance of the petition, and it should be accompanied with a true
copy of the judgment sought to be reviewed, together with twelve (12) copies of the
record on appeal, if any, and of the petitioner's brief as filed in the Court of Appeals. A
verified statement of the date when notice of judgment and denial of the motion for
reconsideration, if any, were received shall accompany the petition.

Only questions of law may be raised in the petition and must be distinctly set
forth. If no record on appeal has been filed in the Court of Appeals, the clerk of the

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Supreme Court, upon admission of the petition, shall demand from the Court of Appeals
the elevation of the whole record of the case. (Emphasis and underscoring supplied)

Rule 45, 1997 Rules of Civil Procedure

RULE 45
Appeal by Certiorari to the Supreme Court

Section 1. Filing of petition with Supreme Court. - A party desiring to appeal

by certiorari from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law,
which must be distinctly set forth. The petitioner may seek the same provisional
remedies by verified motion filed in the same action or proceeding at any time during
its pendency. (Emphasis and underscoring supplied)

That the remedy excepted in the second paragraph of Section 14, RA 6770 could be a
petition for certiorari under Rule 65 of the 1964 Rules of Court or the 1997 Rules of
Procedure is a suggestion that defies traditional norms of procedure. It is basic
procedural law that a Rule 65 petition is based on errors of jurisdiction, and not errors
of judgment to which the classifications of (a) questions of fact, (b) questions of law, or
(c) questions of mixed fact and law, relate to. In fact, there is no procedural rule,
whether in the old or new Rules, which grounds a Rule 65 petition on pure questions of
law. Indeed, it is also a statutory construction principle that the lawmaking body cannot
be said to have intended the establishment of conflicting and hostile systems on the
same subject. Such a result would render legislation a useless and idle ceremony, and
subject the laws to uncertainty and unintelligibility.135 There should then be no
confusion that the second paragraph of Section 14, RA 6770 refers to a Rule 45 appeal
to this Court, and no other. In sum, the appropriate construction of this Ombudsman
Act provision is that all remedies against issuances of the Office of the Ombudsman are
prohibited, except the above-stated Rule 45 remedy to the Court on pure questions of
law.

C. Validity of the second paragraph of

Section 14, RA 6770.

Of course, the second paragraph of Section 14, RA 6770's extremely limited restriction
on remedies is inappropriate since a Rule 45 appeal -which is within the sphere of the
rules of procedure promulgated by this Court - can only be taken against final decisions
or orders of lower courts,136 and not against "findings" of quasi-judicial agencies. As will
be later elaborated upon, Congress cannot interfere with matters of procedure; hence,
it cannot alter the scope of a Rule 45 appeal so as to apply to interlocutory "findings"
issued by the Ombudsman. More significantly, by confining the remedy to a Rule 45
appeal, the provision takes away the remedy of certiorari, grounded on errors of
jurisdiction, in denigration of the judicial power constitutionally vested in courts. In this
light, the second paragraph of Section 14, RA 6770 also increased this Court's appellate
jurisdiction, without a showing, however, that it gave its consent to the same. The

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provision is, in fact, very similar to the fourth paragraph of Section 27, RA 6770 (as
above-cited), which was invalidated in the case of Fabian v. Desiertoni137 (Fabian).138

In Fabian, the Court struck down the fourth paragraph of Section 27, RA 6770 as
unconstitutional since it had the effect of increasing the appellate jurisdiction of the
Court without its advice and concurrence in violation of Section 30, Article VI of the
1987 Constitution.139 Moreover, this provision was found to be inconsistent with Section
1, Rule 45 of the present 1997 Rules of Procedure which, as above-intimated, applies
only to a review of "judgments or final orders of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court, or other courts
authorized by law;" and not of quasi-judicial agencies, such as the Office of the
Ombudsman, the remedy now being a Rule 43 appeal to the Court of Appeals.
In Ruivivar v. Office of the Ombudsman,140 the Court's ratiocinations and ruling
in Fabian were recounted:

The case of Fabian v. Desierto arose from the doubt created in the application of
Section 27 of R.A. No. 6770 (The Ombudsman's Act) and Section 7, Rule III of A.O. No.
7 (Rules of Procedure of the Office of the Ombudsman) on the availability of appeal
before the Supreme Court to assail a decision or order of the Ombudsman in
administrative cases. In Fabian, we invalidated Section 27 of R.A. No. 6770 (and
Section 7, Rule III of A.O. No. 7 and the other rules implementing the Act)
insofar as it provided for appeal by certiorari under Rule 45 from the decisions
or orders of the Ombudsman in administrative cases. We held that Section 27
of R.A. No. 6770 had the effect, not only of increasing the appellate
jurisdiction of this Court without its advice and concurrence in violation of
Section 30, Article VI of the Constitution; it was also inconsistent with Section
1, Rule 45 of the Rules of Court which provides that a petition for review
on certiorari shall apply only to a review of "judgments or final orders of the
Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional
Trial Court, or other courts authorized by law." We pointedly said: chanRoblesvirtualLawlibrary

As a consequence of our ratiocination that Section 27 of Republic Act No. 6770 should
be struck down as unconstitutional, and in line with the regulatory philosophy adopted
in appeals from quasi-judicial agencies in the 1997 Revised Rules of Civil Procedure,
appeals from decisions of the Office of the Ombudsman in administrative disciplinary
cases should be taken to the CA under the provisions of Rule 43.141 (Emphasis supplied)

Since the second paragraph of Section 14, RA 6770 limits the remedy against "decision
or findings" of the Ombudsman to a Rule 45 appeal and thus - similar to the fourth
paragraph of Section 27, RA 6770142 - attempts to effectively increase the Supreme
Court's appellate jurisdiction without its advice and concurrence,143 it is therefore
concluded that the former provision is also unconstitutional and perforce, invalid.
Contrary to the Ombudsman's posturing,144Fabian should squarely apply since the
above-stated Ombudsman Act provisions are in part materia in that they "cover the
same specific or particular subject matter,"145 that is, the manner of judicial review over
issuances of the Ombudsman.

Note that since the second paragraph of Section 14, RA 6770 is clearly determinative of
the existence of the CA's subject matter jurisdiction over the main CA-G.R. SP No.
139453 petition, including all subsequent proceedings relative thereto, as the
Ombudsman herself has developed, the Court deems it proper to resolve this issue ex

492 | P a g e
mero motu  (on its own motion146). This procedure, as was similarly adopted
in Fabian, finds its bearings in settled case law:

The conventional rule, however, is that a challenge on constitutional grounds must be

raised by a party to the case, neither of whom did so in this case, but that is not an
inflexible rule, as we shall explain.

Since the constitution is intended for the observance of the judiciary and other
departments of the government and the judges are sworn to support its provisions, the
courts are not at liberty to overlook or disregard its commands or countenance evasions
thereof. When it is clear , that a statute transgresses the authority vested in a
legislative body, it is the duty of the courts to declare that the constitution, and not the
statute, governs in a case before them for judgment.

Thus, while courts will not ordinarily pass upon constitutional questions which are not
raised in the pleadings, the rule has been recognized to admit of certain exceptions. It
does not preclude a court from inquiring into its own jurisdiction or compel it to enter a
judgment that it lacks jurisdiction to enter. If a statute on which a court's jurisdiction in
a proceeding depends is unconstitutional, the court has no jurisdiction in the
proceeding, and since it may determine whether or not it has jurisdiction, it necessarily
follows that it may inquire into the constitutionality of the statute.

Constitutional questions, not raised in the regular and orderly procedure in the
trial are ordinarily rejected unless the jurisdiction of the court below or that of
the appellate court is involved in which case it may be raised at any time or on
the court's own motion. The Court ex mero motu may take cognizance of lack of
jurisdiction at any point in the case where that fact is developed. The court has a
clearly recognized right to determine its own jurisdiction in any
proceeding.147 (Emphasis supplied)

D. Consequence of invalidity.

In this case, the Rule 65 petition for certiorari in CA-G.R. SP No. 139453 was filed by
Binay, Jr. before the CA in order to nullify the preventive suspension order issued by
the Ombudsman, an interlocutory order,148 hence, unappealable.149

In several cases decided after Fabian, the Court has ruled that Rule 65 petitions
for certiorari against unappelable issuances150 of the Ombudsman should be filed before
the CA, and not directly before this Court:

In Office of the Ombudsman v. Capulong151 (March 12, 2014), wherein a preventive

suspension order issued by the Office of the Ombudsman was - similar to this case -
assailed through a Rule 65 petition for certiorari filed by the public officer before the
CA, the Court held that "[t]here being a finding of grave abuse of discretion on the part
of the Ombudsman, it was certainly imperative for the CA to grant incidental reliefs, as
sanctioned by Section 1 of Rule 65."152

In Dagan v. Office of the Ombudsman 153 (November 19, 2013), involving a Rule 65

petition for certiorari assailing a final and unappealable order of the Office of the
Ombudsman in an administrative case, the Court remarked that "petitioner employed

493 | P a g e
the correct mode of review in this case, i.e., a special civil action for certiorari before
the Court of Appeals."154 In this relation, it stated that while "a special civil action
for Certiorari is within the concurrent original jurisdiction of the Supreme Court and the
Court of Appeals, such petition should be initially filed with the Court of Appeals in
observance of the doctrine of hierarchy of courts." Further, the Court upheld Barata v.
Abalos, Jr.155 (June 6, 2001), wherein it was ruled that the remedy against final and
unappealable orders of the Office of the Ombudsman in an administrative case was a
Rule 65 petition to the CA. The same verdict was reached in Ruivivar156 (September 16,
2008).

Thus, with the unconstitutionality of the second paragraph of Section 14, RA 6770, the
Court, consistent with existing jurisprudence, concludes that the CA has subject matter
jurisdiction over the main CA-G.R. SP No. 139453 petition. That being said, the Court
now examines the objections of the Ombudsman, this time against the CA's authority to
issue the assailed TRO and WPI against the implementation of the preventive
suspension order, incidental to that main case.

III.

From the inception of these proceedings, the Ombudsman has been adamant that the
CA has no jurisdiction to issue any provisional injunctive writ against her office to enjoin
its preventive suspension orders. As basis, she invokes the first paragraph of
Section 14, RA 6770 in conjunction with her office's independence under the 1987
Constitution. She advances the idea that "[i]n order to further ensure [her office's]
independence, [RA 6770] likewise insulated it from judicial intervention,"157 particularly,
"from injunctive reliefs traditionally obtainable from the courts,"158 claiming that said
writs may work "just as effectively as direct harassment or political pressure would."159

A. The concept of Ombudsman independence.

Section 5, Article XI of the 1987 Constitution guarantees the independence of the Office
of the Ombudsman:

Section 5. There is hereby created the independent Office of the Ombudsman,

composed of the Ombudsman to be known as Tanodbayan, one overall Deputy and at
least one Deputy each for Luzon, Visayas[,] and Mindanao. A separate Deputy for the
military establishment may likewise be appointed. (Emphasis supplied)

In Gonzales III v. Office of the President 160 (Gonzales III), the Court traced the
historical underpinnings of the Office of the Ombudsman:

Prior to the 1973 Constitution, past presidents established several Ombudsman-like

agencies to serve as the people's medium for airing grievances and for direct redress
against abuses and misconduct in the government. Ultimately, however, these agencies
failed to fully realize their objective for lack of the political independence necessary for
the effective performance of their function as government critic.

It was under the 1973 Constitution that the Office of the Ombudsman became a
constitutionally-mandated office to give it political independence and adequate powers
to enforce its mandate. Pursuant to the ( 1973 Constitution, President Ferdinand

494 | P a g e
Marcos enacted Presidential Decree (PD) No. 1487, as amended by PD No. 1607 and PD
No. 1630, creating the Office of the Ombudsman to be known as Tanodbayan. It was
tasked principally to investigate, on complaint or motu proprio, any administrative act
of any administrative agency, including any government-owned or controlled
corporation. When the Office of the Tanodbayan was reorganized in 1979, the powers
previously vested in the Special Prosecutor were transferred to the Tanodbayan himself.
He was given the exclusive authority to conduct preliminary investigation of all cases
cognizable by the Sandiganbayan, file the corresponding information, and control the
prosecution of these cases.

With the advent of the 1987 Constitution, a new Office of the Ombudsman was created
by constitutional fiat. Unlike in the 1973 Constitution, its independence was
expressly and constitutionally guaranteed. Its objectives are to enforce the state
policy in Section 27, Article II and the standard of accountability in public service under
Section 1, Article XI of the 1987 Constitution. These provisions read: chanRoblesvirtualLawlibrary

Section 27. The State shall maintain honesty and integrity in the public service and take
positive and effective measures against graft and corruption.

Section 1. Public office is a public trust. Public officers and employees must, at all
times, be accountable to the people, serve them with utmost responsibility, integrity,
loyalty, and efficiency; act with patriotism and justice, and lead modest
lives.161 (Emphasis supplied)

More significantly, Gonzales III explained the broad scope of the office's mandate, and
in correlation, the impetus behind its independence:

Under Section 12, Article XI of the 1987 Constitution, the Office of the Ombudsman is
envisioned to be the "protector of the people" against the inept, abusive, and corrupt in
the Government, to function essentially as a complaints and action bureau. This
constitutional vision of a Philippine Ombudsman practically intends to make the
Ombudsman an authority to directly check and guard against the ills, abuses and
excesses , of the bureaucracy. Pursuant to Section 13 (8), Article XI of the 1987
Constitution, Congress enacted RA No. 6770 to enable it to further realize the vision of
the Constitution. Section 21 of RA No. 6770 provides: chanRoblesvirtualLawlibrary

Section 21. Official Subject to Disciplinary Authority; Exceptions. - The Office of the
Ombudsman shall have disciplinary authority over all elective and appointive officials of
the Government and its subdivisions, instrumentalities, and agencies, including
Members of the Cabinet, local government, government-owned or controlled
corporations and their subsidiaries, except over officials who may be removed only by
impeachment or over Members of Congress, and the Judiciary. ChanRoblesVirtualawlibrary

As the Ombudsman is expected to be an "activist watchman," the < Court has upheld
its actions, although not squarely falling under the broad powers granted [to] it by the
Constitution and by RA No. 6770, if these actions are reasonably in line with its official
function and consistent with the law and the Constitution.

The Ombudsman's broad investigative and disciplinary powers include all acts of
malfeasance, misfeasance, and nonfeasance of all public officials, including Members of
the Cabinet and key Executive officers, during their tenure. To support these broad
powers, the Constitution saw it fit to insulate the Office of the Ombudsman
from the pressures and influence of officialdom and partisan politics and from

495 | P a g e
fear of external reprisal by making it an "independent" office, x x x.

xxxx

Given the scope of its disciplinary authority, the Office of the Ombudsman is a very
powerful government constitutional agency that is considered "a notch above other
grievance-handling investigative bodies." It has powers, both constitutional and
statutory, that are commensurate , with its daunting task of enforcing accountability of
public officers.162 (Emphasis and underscoring supplied)

Gonzales III is the first case which grappled with the meaning of the Ombudsman's
independence vis-a-vis the independence of the other constitutional bodies. Pertinently,
the Court observed:

(1) "[T]he independence enjoyed by the Office of the Ombudsman and by the

Constitutional Commissions shares certain characteristics - they do not owe their
existence to any act of Congress, but are created by the Constitution itself;
additionally, they all enjoy fiscal autonomy. In general terms, the framers of the
Constitution intended that these 'independent' bodies be insulated from
political pressure to the extent that the absence of 'independence' would result in the
impairment of their core functions"163;
cralawlawlibrary

(2) "[T]he Judiciary, the Constitutional Commissions, and the Ombudsman must have
the independence and flexibility needed in the discharge of their constitutional duties.
The imposition of restrictions and constraints on the manner the independent
constitutional offices allocate and utilize the funds appropriated for their
operations is anathema to fiscal autonomy and violative not only [of] the express
mandate of the Constitution, but especially as regards the Supreme Court, of the
independence and separation of powers upon which the entire fabric of our
constitutional system is based";164 and

(3) "[T]he constitutional deliberations explain the Constitutional Commissions' need for

independence. In the deliberations of the 1973 Constitution, the delegates amended the
1935 Constitution by providing for a constitutionally-created Civil Service Commission,
instead of one created by law, on the premise that the effectivity of this body is
dependent on its freedom from the tentacles of politics. In a similar manner, the
deliberations of the 1987 Constitution on the Commission on Audit highlighted the
developments in the past Constitutions geared towards insulating the Commission
on Audit from political pressure."165

At bottom, the decisive ruling in Gonzales III, however, was that the independence of
the Office of the Ombudsman, as well as that of the foregoing independent
bodies, meant freedom from control or supervision of the Executive
Department:

[T]he independent constitutional commissions have been consistently intended by the

framers to be independent from executive control or supervision or any form of
political influence. At least insofar as these bodies are concerned, jurisprudence is
not scarce on how the "independence" granted to these bodies prevents presidential
interference.

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In Brillantes, Jr. v. Yorac (G.R. No. 93867, December 18, 1990, 192 SCRA 358), we
emphasized that the Constitutional Commissions, which have been characterized under
the Constitution as "independent," are not under the control of the President, even
if they discharge functions that are executive in nature. The Court declared as
unconstitutional the President's act of temporarily appointing the respondent in that
case as Acting Chairman of the [Commission on Elections] "however well-meaning" it
might have been.

In Bautista v. Senator Salonga (254 Phil. 156, 179 [1989]), the Court categorically
stated that the tenure of the commissioners of the independent Commission on Human
Rights could not be placed under the discretionary power of the President.

xxxx

The kind of independence enjoyed by the Office of the Ombudsman certainly cannot be
inferior - but is similar in degree and kind - to the independence similarly guaranteed
by the Constitution to the Constitutional Commissions since all these offices fill the
political interstices of a republican democracy that are crucial to its existence and
proper functioning.166 (Emphases and underscoring supplied)

Thus, in Gonzales III, the Court declared Section 8 (2), RA 6770, which provides that
"[a] Deputy or the Special Prosecutor, may be removed from office by the President for
any of the grounds provided for the removal of the Ombudsman, and after due
process," partially unconstitutional insofar as it subjected the Deputy Ombudsman to
the disciplinary authority of the President for violating the principle of independence.
Meanwhile, the validity of Section 8 (2), RA 6770 was maintained insofar as the Office
of the Special Prosecutor was concerned since said office was not considered to be
constitutionally within the Office of the Ombudsman and is, hence, not entitled to the
independence the latter enjoys under the Constitution.167

As may be deduced from the various discourses in Gonzales III, the concept of
Ombudsman's independence covers three (3) things:

First: creation by the Constitution, which means that the office cannot be abolished,
nor its constitutionally specified functions and privileges, be removed, altered, or
modified by law, unless the Constitution itself allows, or an amendment thereto is
made; cralawlawlibrary

Second: fiscal autonomy, which means that the office "may not be obstructed from
[its] freedom to use or dispose of [its] funds for purposes germane to [its]
functions;168hence, its budget cannot be strategically decreased by officials of the
political branches of government so as to impair said functions; and

Third: insulation from executive supervision and control, which means that those
within the ranks of the office can only be disciplined by an internal authority.

Evidently, all three aspects of independence intend to protect the Office of the
Ombudsman from political harassment and pressure, so as to free it from the
"insidious tentacles of politics."169

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That being the case, the concept of Ombudsman independence cannot be invoked as
basis to insulate the Ombudsman from judicial power constitutionally vested unto the
courts. Courts are apolitical bodies, which are ordained to act as impartial tribunals and
apply even justice to all. Hence, the Ombudsman's notion that it can be exempt from
an incident of judicial power - that is, a provisional writ of injunction against a
preventive suspension order - clearly strays from the concept's rationale of insulating
the office from political harassment or pressure.

B. The first paragraph of Section 14, RA

6770 in light of the powers of Congress and the
Court under the 1987 Constitution.

The Ombudsman's erroneous abstraction of her office's independence notwithstanding,

it remains that the first paragraph of Section 14, RA 6770 textually prohibits courts
from extending provisional injunctive relief to delay any investigation conducted by her
office. Despite the usage of the general phrase "[n]o writ of injunction shall be issued
by any court," the Ombudsman herself concedes that the prohibition does not cover the
Supreme Court.170 As support, she cites the following Senate deliberations:

Senator [Ernesto M.] Maceda. Mr. President, I do not know if an amendment is

necessary. I would just like to inquire for the record whether below the
Supreme Court, it is understood that there is no injunction policy against the
Ombudsman by lower courts. Or, is it necessary to have a special paragraph
for that?

Senator Angara. Well, there is no provision here, Mr. President, that will prevent an
injunction against the Ombudsman being issued.

Senator Maceda. In which case, I think that the intention, this being one of
the highest constitutional bodies, is to subject this only to   certiorari  to the
Supreme Court. I think an injunction from the Supreme Court is, of course, in
order but no lower courts should be allowed to interfere.  We had a very bad
experience with even, let us say, the Forestry Code where no injunction is supposed to
be issued against the Department of Natural Resources. Injunctions are issued right
and left by RTC judges all over the country.

The President. Why do we not make an express provision to that effect?

Senator Angara. We would welcome that, Mr. President.

The President. No [writs of injunction] from the trial courts other than the
Supreme Court.

Senator Maceda. I so move, Mr. President, for that amendment.

The President. Is there any objection? [Silence] Hearing none, the same is

approved.171

Further, she acknowledges that by virtue of Sections 1 and 5 (1), Article VIII of the

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1987 Constitution, acts of the Ombudsman, including interlocutory orders, are subject
to the Supreme Court's power of judicial review As a corollary, the Supreme Court may
issue ancillary mjunctive writs or provisional remedies in the exercise of its power of
judicial review over matters pertaining to ongoing investigations by the Office of the
Ombudsman. Respecting the CA, however, the Ombudsman begs to differ.172

With these submissions, it is therefore apt to examine the validity of the first paragraph
of Section 14, RA 6770 insofar as it prohibits all courts, except this Court, from issuing
provisional writs of injunction to enjoin an Ombudsman investigation. That the
constitutionality of this provision is the lis mota of this case has not been seriously
disputed. In fact, the issue anent its constitutionality was properly raised and presented
during the course of these proceedings.173 More importantly, its resolution is clearly
necessary to the complete disposition of this case.174

In the enduring words of Justice Laurel in Angara v. The Electoral

Commission (Angara),175 the "Constitution has blocked out with deft strokes and in bold
lines, allotment of power to the executive, the legislative[,] and the judicial
departments of the government."176 The constitutional demarcation of the three
fundamental powers of government is more commonly known as the principle of
separation of powers. In the landmark case of Belgica v. Ochoa, Jr. (Belgica),177 the
Court held that "there is a violation of the separation of powers principle when one
branch of government unduly encroaches on the domain of another."178 In particular,
"there is a violation of the principle when there is impermissible (a) interference with
and/or (b) assumption of another department's functions."179

Under Section 1, Article VIII of the 1987 Constitution, judicial power is allocated to

the Supreme Court and all such lower courts:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.

This Court is the only court established by the Constitution, while all other lower
courts may be established by laws passed by Congress.  Thus, through the
passage of Batas Pambansa Bilang (BP) 129,180 known as "The Judiciary Reorganization
Act of 1980," the Court of Appeals,181 the Regional Trial Courts,182 and the Metropolitan
Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts183 were
established. Later, through the passage of RA 1125,184 and Presidential Decree No. (PD)
1486,185 the Court of Tax Appeals, and the Sandiganbayan were respectively
established.

In addition to the authority to establish lower courts, Section 2, Article VIII of the
1987 Constitution empowers Congress to define, prescribe, and apportion the
jurisdiction of all courts, except that it may not deprive the Supreme Court of
its jurisdiction over cases enumerated in Section 5186 of the same Article:

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Section 2. The Congress shall have the power to define, prescribe, ' and apportion the
jurisdiction of the various courts but may not deprive the Supreme Court of its
jurisdiction over cases enumerated in Section 5 hereof.

xxxx ChanRoblesVirtualawlibrary

Jurisdiction, as hereinabove used, more accurately pertains to jurisdiction over the

subject matter of an action. In The Diocese ofBacolod v. Commission on
Elections,187 subject matter jurisdiction was defined as "the authority 'to hear and
determine cases of the general class to which the proceedings in question
belong and is conferred by the sovereign authority which organizes the court
and defines its powers.'"

Among others, Congress defined, prescribed, and apportioned the subject matter
jurisdiction of this Court (subject to the aforementioned constitutional limitations), the
Court of Appeals, and the trial courts, through the passage of BP 129, as amended.

In this case, the basis for the CA's subject matter jurisdiction over Binay, Jr.'s main
petition for certiorari in CA-G.R. SP No. 139453 is Section 9(1), Chapter I of BP 129,
as amended:

Section 9. Jurisdiction. - The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari,

habeas corpus, and quo warranto, and auxiliary writs or processes,
whether or not in aid of its appellate jurisdiction[.]

Note that the CA's certiorari jurisdiction, as above-stated, is not only original but

also concurrent with the Regional Trial Courts (under Section 21 (1), Chapter II of BP
129), and the Supreme Court (under Section 5, Article VIII of the 1987 Philippine
Constitution). In view of the concurrence of these courts' jurisdiction over petitions
for certiorari, the doctrine of hierarchy of courts should be followed. In People v.
Cuaresma,188 the doctrine was explained as follows:

[T]his concurrence of jurisdiction is not x x x to be taken as according to parties

seeking any of the writs an absolute, unrestrained freedom of choice of the court to
which application therefor will be directed. There is after all a hierarchy of courts.
That hierarchy is determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard for that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals.189

When a court has subject matter jurisdiction over a particular case, as conferred

unto it by law, said court may then exercise its jurisdiction acquired over that case,
which is called judicial power.

Judicial power, as vested in the Supreme Court and all other courts established by

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law, has been defined as the "totality of powers a court exercises when it
assumes jurisdiction and hears and decides a case."190 Under Section 1, Article
VIII of the 1987 Constitution, it includes "the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government."

In Oposa v. Factoran, Jr.191 the Court explained the expanded scope of judicial power
under the 1987 Constitution:

The first part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred by law. The second part of the
authority represents a broadening of f judicial power to enable the courts of justice to
review what was before forbidden territory, to wit, the discretion of the political
departments of the government.

As worded, the new provision vests in the judiciary, and particularly the Supreme
Court, the power to rule upon even the wisdom of the decisions of the executive and
the legislature and to declare their acts invalid for lack or excess of jurisdiction because
they are tainted with grave abuse of discretion. The catch, of course, is the meaning of
"grave abuse of discretion," which is a very elastic phrase that can expand or contract
according to the disposition of the judiciary.192

Judicial power is never exercised in a vacuum. A court's exercise of the

jurisdiction it has acquired over a particular case conforms to the limits and
parameters of the rules of procedure duly promulgated by this Court. In other
words, procedure is the framework within which judicial power is exercised. In Manila
Railroad Co. v. Attorney-General,193 the Court elucidated that "[t]he power or authority
of the court over the subject matter existed and was fixed before procedure in a given
cause began. Procedure does not alter or change that power or authority; it
simply directs the manner in which it shall be fully and justly exercised.  To be
sure, in certain cases, if that power is not exercised in conformity with the provisions of
the procedural law, purely, the court attempting to exercise it loses the power to
exercise it legally. This does not mean that it loses jurisdiction of the subject matter."194

While the power to define, prescribe, and apportion the jurisdiction of the various courts
is, by constitutional design, vested unto Congress, the power to promulgate rules
concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts belongs exclusively to this Court. Section 5
(5), Article VIII of the 1987 Constitution reads:

Section 5. The Supreme Court shall have the following powers:

xxxx

(5) Promulgate rules concerning the protection and enforcement of

constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the Integrated Bar, and legal assistance to the
underprivileged. Such rules shall provide a simplified and inexpensive procedure for the

501 | P a g e
speedy disposition of cases, shall be uniform for all courts of the same grade, and shall
not diminish, increase, or modify substantive rights. Rules of procedure of special
courts and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court. (Emphases and underscoring supplied)

In Echegaray v. Secretary of Justice195 (Echegaray), the Court traced the evolution of its

rule-making authority, which, under the 1935196 and 1973 Constitutions,197 had been
priorly subjected to a power-sharing scheme with Congress.198 As it now stands, the
1987 Constitution textually altered the old provisions by deleting the concurrent
power of Congress to amend the rules, thus solidifying in one body the Court's
rule-making powers, in line with the Framers' vision of institutionalizing a
"[s]tronger and more independent judiciary."199

The records of the deliberations of the Constitutional Commission would show200 that

the Framers debated on whether or not the Court's rule-making powers should be
shared with Congress. There was an initial suggestion to insert the sentence "The
National Assembly may repeal, alter, or supplement the said rules with the advice and
concurrence of the Supreme Court", right after the phrase "Promulgate rules concerning
the protection and enforcement of constitutional rights, pleading, practice, and
procedure in all courts, the admission to the practice of law, the integrated bar, and
legal assistance to the underprivileged^" in the enumeration of powers of the Supreme
Court. Later, Commissioner Felicitas S. Aquino proposed to delete the former sentence
and, instead, after the word "[underprivileged," place a comma (,) to be followed by
"the phrase with the concurrence of the National Assembly." Eventually, a compromise
formulation was reached wherein (a) the Committee members agreed to Commissioner
Aquino's proposal to delete the phrase "the National Assembly may repeal, alter, or
supplement the said rules with the advice and concurrence of the Supreme Court" and
(b) in turn, Commissioner Aquino agreed to withdraw his proposal to add "the phrase
with the concurrence of the National Assembly." The changes were approved,
thereby leading to the present lack of textual reference to any form of
Congressional participation in Section 5 (5), Article VIII, supra. The prevailing
consideration was that "both bodies, the Supreme Court and the Legislature,
have their inherent powers."201

Thus, as it now stands, Congress has no authority to repeal, alter, or supplement rules
concerning pleading, practice, and procedure. As pronounced in Echegaray:

The rule making power of this Court was expanded. This Court for the first time was
given the power to promulgate rules concerning the protection and enforcement of
constitutional rights. The Court was also r granted for the first time the power to
disapprove rules of procedure of special courts and quasi-judicial bodies. But most
importantly, the 1987 Constitution took away the power of Congress to repeal,
alter, or supplement rules concerning pleading, practice and procedure. In
fine, the power to promulgate rules of pleading, practice and procedure is no
longer shared by this Court with Congress, more so with the
Executive.202 (Emphasis and underscoring supplied)

Under its rule-making authority, the Court has periodically passed various rules of
procedure, among others, the current 1997 Rules of Civil Procedure. Identifying the
appropriate procedural remedies needed for the reasonable exercise of every

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court's judicial power, the provisional remedies of temporary restraining
orders and writs of preliminary injunction were thus provided.

A temporary restraining order and a writ of preliminary injunction both constitute

temporary measures availed of during the pendency of the action. They are, by nature,
ancillary because they are mere incidents in and are dependent upon the result of the
main action. It is well-settled that the sole object of a temporary restraining order
or a writ of preliminary injunction, whether prohibitory or mandatory, is
to preserve the status quo203 until the merits of the case can be heard. They are
usually granted when it is made to appear that there is a substantial controversy
between the parties and one of them is committing an act or threatening the immediate
commission of an act that will cause irreparable injury or destroy the status quo of the
controversy before a full hearing can be had on the merits of the case. In other words,
they are preservative remedies for the protection of substantive rights or interests, and,
hence, not a cause of action in itself, but merely adjunct to a main suit.204 In a sense,
they are regulatory processes meant to prevent a case from being mooted by the
interim acts of the parties.

Rule 58 of the 1997 Rules of Civil Procedure generally governs the provisional remedies
of a TRO and a WPI. A preliminary injunction is defined under Section 1,205 Rule 58,
while Section 3206 of the same Rule enumerates the grounds for its issuance.
Meanwhile, under Section 5207 thereof, a TRO may be issued as a precursor to the
issuance of a writ of preliminary injunction under certain procedural parameters.

The power of a court to issue these provisional injunctive reliefs coincides with
its inherent power to issue all auxiliary writs, processes, and other means
necessary to carry its acquired jurisdiction into effect under Section 6, Rule
135 of the Rules of Court which reads:

Section 6. Means to carry jurisdiction into effect. - When by law jurisdiction is conferred
on a court or judicial officer, all auxiliary writs, f processes and other means necessary
to carry it into effect may be employed by such court or officer; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically pointed out by law208 or
by these rules, any suitable process or mode of proceeding may be adopted which
appears comfortable to the spirit of the said law or rules. ChanRoblesVirtualawlibrary

In City of Manila v. Grecia-Cuerdo,209 which is a case involving "[t]he supervisory power

or jurisdiction of the [Court of Tax Appeals] to issue a writ of certiorari in aid of its
appellate jurisdiction"210 over "decisions, orders or resolutions of the RTCs in local tax
cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction,"211 the Court ruled that said power "should coexist with, and be a
complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the acts of the
latter:"212

A grant of appellate jurisdiction implies that there is included in it the power

necessary to exercise it effectively, to make all orders that ; will preserve the
subject of the action, and to give effect to the final determination of the appeal.
It carries with it the power to protect that jurisdiction and to make the decisions of the
court thereunder effective. The court, in aid of its appellate jurisdiction, has authority to

503 | P a g e
control all auxiliary and incidental matters necessary to the efficient and proper
exercise of that jurisdiction. For this purpose, it may, when necessary, prohibit or
restrain the performance of any act which might interfere with the proper exercise of its
rightful jurisdiction in cases pending before it.213 (Emphasis supplied)

In this light, the Court expounded on the inherent powers of a court endowed with
subject matter jurisdiction:

[A] court which is endowed with a particular jurisdiction should have powers which are
necessary to enable it to act effectively within such jurisdiction. These should be
regarded as powers which are inherent in its jurisdiction and the court must
possess them in order to enforce its rules of practice and to suppress any
abuses of its process and to t defeat any attempted thwarting of such process.

x x x x  cralawlawlibrary

Indeed, courts possess certain inherent powers which may be said to be implied from

a general grant of jurisdiction, in addition to those expressly conferred on them. These
inherent powers are such powers as are necessary for the ordinary and
efficient exercise of jurisdiction; or are essential to the existence, dignity and
functions of the courts, as well as to the due administration of justice; or are
directly appropriate, convenient and suitable to the execution of their granted
powers; and include the power to maintain the court's jurisdiction and render
it effective in behalf of the litigants.214 (Emphases and underscoring supplied)

Broadly speaking, the inherent powers of the courts resonates the long-entrenched
constitutional principle, articulated way back in the 1936 case of Angara, that "where a
general power is conferred or duty enjoined, every particular power necessary for the
exercise of the one or the performance of the other is also conferred."215

In the United States, the "inherent powers doctrine refers to the principle, by which
the courts deal with diverse matters over which they are thought to have intrinsic
authority like procedural [rule-making] and general judicial housekeeping. To justify the
invocation or exercise of inherent powers, a court must show that the powers are
reasonably necessary to achieve the specific purpose for which the exercise is
sought. Inherent powers enable the judiciary to accomplish its constitutionally
mandated functions."216

In Smothers v. Lewis217 (Smothers), a case involving the constitutionality of a statute

which prohibited courts from enjoining the enforcement of a revocation order of an
alcohol beverage license pending appeal,218 the Supreme Court of Kentucky held:

[T]he Court is x x x vested with certain "inherent" powers to do that which is

reasonably necessary for the administration of justice within the scope of their
jurisdiction. x x x [W]e said while considering the rule making power and the judicial
power to be one and the same that ". . . the grant of judicial power [rule making
power] to the courts by the constitution carries with it, as a necessary
incident, the right to make that power effective in the administration of
justice." (Emphases supplied)

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Significantly, Smothers characterized a court's issuance of provisional injunctive relief
as an exercise of the court's inherent power, and to this end, stated that any attempt
on the part of Congress to interfere with the same was constitutionally impermissible:

It is a result of this foregoing line of thinking that we now adopt the language
framework of 28 Am.Jur.2d, Injunctions, Section 15, and once and for all make clear
that a court, once having obtained jurisdiction of a cause of action, has, as an incidental
to its constitutional grant of power, inherent power to do all things reasonably
necessary to the administration of justice in the case before it. In the exercise of this
power, a court, when necessary in order to protect or preserve the subject
matter of the litigation, to protect its jurisdiction and to make its judgment
effective, may grant or issue a temporary injunction in aid of or ancillary to
the principal action.

The control over this inherent judicial power, in this particular instance the
injunction, is exclusively within the constitutional realm of the courts. As such,
it is not within the purview of the legislature to grant or deny the power nor is
it within the purview of the legislature to shape or fashion circumstances
under which this inherently judicial power may be or may not be granted or
denied.

This Court has historically recognized constitutional limitations upon the power of the
legislature to interfere with or to inhibit the performance of constitutionally granted and
inherently provided judicial functions, x x x

xxxx

We reiterate our previously adopted language, ". . . a court, once having obtained
jurisdiction of a cause of action, has, as incidental to its general jurisdiction, inherent
power to do all things reasonably necessary f to the administration of justice in the case
before it. . ." This includes the inherent power to issue injunctions. (Emphases
supplied)

Smothers also pointed out that the legislature's authority to provide a right to appeal in
the statute does not necessarily mean that it could control the appellate judicial
proceeding:

However, the fact that the legislature statutorily provided for this appeal does not give
it the right to encroach upon the constitutionally granted powers of the judiciary. Once
the administrative action has ended and the right to appeal arises the
legislature is void of any right to control a subsequent appellate judicial
proceeding. The judicial rules have come into play and have preempted the
field.219 (Emphasis supplied)

With these considerations in mind, the Court rules that when Congress passed the first
paragraph of Section 14, RA 6770 and, in so doing, took away from the courts their
power to issue a TRO and/or WPI to enjoin an investigation conducted by the
Ombudsman, it encroached upon this Court's constitutional rule-making authority.
Clearly, these issuances, which are, by nature, provisional reliefs and auxiliary writs

505 | P a g e
created under the provisions of the Rules of Court, are matters of procedure which
belong exclusively within the province of this Court. Rule 58 of the Rules of Court did
not create, define, and regulate a right but merely prescribed the means of
implementing an existing right220 since it only provided for temporary reliefs to preserve
the applicant's right in esse which is threatened to be violated during the course of a
pending litigation. In the case of Fabian,211 it was stated that:

If the rule takes away a vested right, it is not procedural. If the rule creates a right
such as the right to appeal, it may be classified as a substantive matter; but if it
operates as a means of implementing an existing right then the rule deals merely with
procedure. ChanRoblesVirtualawlibrary

Notably, there have been similar attempts on the part of Congress, in the exercise of its
legislative power, to amend the Rules of Court, as in the cases of: (a) In Re: Exemption
of The National Power Corporation from Payment of Filing/ Docket Fees;222 (b) Re:
Petition for Recognition of the Exemption of the Government Service Insurance System
(GSIS) from Payment of Legal Fees;223 and (c)  Baguio Market Vendors Multi-Purpose
Cooperative (BAMARVEMPCO) v. Cabato-Cortes224 While these cases involved legislative
enactments exempting government owned and controlled corporations and
cooperatives from paying filing fees, thus, effectively modifying Rule 141 of the Rules of
Court (Rule on Legal Fees), it was, nonetheless, ruled that the prerogative to amend,
repeal or even establish new rules of procedure225 solely belongs to the Court,
to the exclusion of the legislative and executive branches of government. On
this score, the Court described its authority to promulgate rules on pleading, practice,
and procedure as exclusive and "[o]ne of the safeguards of [its] institutional
independence."226

That Congress has been vested with the authority to define, prescribe, and apportion
the jurisdiction of the various courts under Section 2, Article VIII supra, as well as to
create statutory courts under Section 1, Article VIII supra, does not result in an
abnegation of the Court's own power to promulgate rules of pleading, practice, and
procedure under Section 5 (5), Article VIII supra. Albeit operatively interrelated, these
powers are nonetheless institutionally separate and distinct, each to be preserved under
its own sphere of authority. When Congress creates a court and delimits its
jurisdiction, the procedure for which its jurisdiction is exercised is fixed by the
Court through the rules it promulgates. The first paragraph of Section 14, RA 6770
is not a jurisdiction-vesting provision, as the Ombudsman misconceives,227 because it
does not define, prescribe, and apportion the subject matter jurisdiction of courts to act
on certiorari cases; the certiorari jurisdiction of courts, particularly the CA, stands under
the relevant sections of BP 129 which were not shown to have been repealed. Instead,
through this provision, Congress interfered with a provisional remedy that was
created by this Court under its duly promulgated rules of procedure, which
utility is both integral and inherent to every court's exercise of judicial power.
Without the Court's consent to the proscription, as may be manifested by an
adoption of the same as part of the rules of procedure through an
administrative circular issued therefor, there thus, stands to be a violation of
the separation of powers principle.

In addition, it should be pointed out that the breach of Congress in prohibiting

provisional injunctions, such as in the first paragraph of Section 14, RA 6770, does not

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only undermine the constitutional allocation of powers; it also practically dilutes a
court's ability to carry out its functions. This is so since a particular case can
easily be mooted by supervening events if no provisional injunctive relief is
extended while the court is hearing the same. Accordingly, the court's acquired
jurisdiction, through which it exercises its judicial power, is rendered nugatory. Indeed,
the force of judicial power, especially under the present Constitution, cannot be
enervated due to a court's inability to regulate what occurs during a proceeding's
course. As earlier intimated, when jurisdiction over the subject matter is accorded by
law and has been acquired by a court, its exercise thereof should be undipped. To give
true meaning to the judicial power contemplated by the Framers of our Constitution,
the Court's duly promulgated rules of procedure should therefore remain unabridged,
this, even by statute. Truth be told, the policy against provisional injunctive writs in
whatever variant should only subsist under rules of procedure duly promulgated by the
Court given its sole prerogative over the same.

The following exchange between Associate Justice Marvic Mario Victor F. Leonen
(Justice Leonen) and the Acting Solicitor General Florin T. Hilbay (Acting Solicitor
General Hilbay) mirrors the foregoing observations:

JUSTICE LEONEN:
Okay. Now, would you know what rule covers injunction in the Rules of Court?

ACTING SOLICITOR GENERAL HILBAY:

Rule 58, Your Honor.

JUSTICE LEONEN:
58, that is under the general rubric if Justice Bersamin will correct me if I will be
mistaken under the rubric of what is called provisional remedies, our resident expert
because Justice Peralta is not here so Justice Bersamin for a while. So provisional
remedy you have injunction, x x x.

xxxx

JUSTICE LEONEN:
Okay, Now, we go to the Constitution. Section 5, subparagraph 5 of Article VIII of the
Constitution, if you have a copy of the Constitution, can you please read that provision?
Section 5, Article VIII the Judiciary subparagraph 5, would you kindly read that
provision?

ACTING SOLICTOR GENERAL HILBAY.

"Promulgate rules concerning the protection and enforcement of constitutional rights,
pleading, practice and procedure in all courts..."

JUSTICE LEONEN:
Okay, we can stop with that, promulgate rules concerning pleading, practice and
procedure in all courts. This is the power, the competence, the jurisdiction of what
constitutional organ?

ACTING SOLICITOR GENERAL HILBAY:

The Supreme Court, Your Honor.

507 | P a g e
JUSTICE LEONEN:
The Supreme Court. This is different from Article VIII Sections 1 and 2 which we've
already been discussed with you by my other colleagues, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
Okay, so in Section 2, [apportion] jurisdiction that is the power of Congress, is that not
correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
On the other hand, the power to promulgate rules is with the Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
A TRO and a writ of preliminary injunction, would it be a separate case or is it part of
litigation in an ordinary case?

ACTING SOLICITOR GENERAL HILBAY:

It is an ancillary remedy, Your Honor.

JUSTICE LEONEN:
In fact, it originated as an equitable remedy, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In order to preserve the power of a court so that at the end of litigation, it will
not be rendered moot and academic, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In that view, isn't Section 14, first paragraph, unconstitutional?

ACTING SOLICITOR GENERAL HILBAY:

No, Your Honor.

xxxx

JUSTICE LEONEN.

508 | P a g e
Can Congress say that a Court cannot prescribe Motions to Dismiss under Rule 16?

ACTING SOLICITOR GENERAL HILBAY:

Your Honor, Congress cannot impair the power of the Court to create remedies, x x x.

JUSTICE LEONEN.
What about bill [of] particulars, can Congress say, no Court shall have the power to
issue the supplemental pleading called the bill of t particular [s]? It cannot, because
that's part of procedure...

ACTING SOLICITOR GENERAL HILBAY:

That is true.

JUSTICE LEONEN
...or for that matter, no Court shall act on a Motion to Quash, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct.

JUSTICE LEONEN:
So what's different with the writ of injunction?

ACTING SOLICITOR GENERAL HILBAY:

Writ of injunction, Your Honor, requires the existence of jurisdiction on the part of a
court that was created by Congress. In the absence of jurisdiction... (interrupted)

JUSTICE LEONEN:
No, writ of injunction does not attach to a court. In other words, when they create a
special agrarian court it has all procedures with it but it does not attach particularly to
that particular court, is that not correct?

ACTING SOLICTOR GENERAL HILBAY:

When Congress, Your Honor, creates a special court...

JUSTICE LEONEN:
Again, Counsel, what statute provides for a TRO, created the concept of a TRO? It was
a Rule. A rule of procedure and the Rules of Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Yes, Your Honor.

JUSTICE LEONEN:
And a TRO and a writ of preliminary injunction does not exist unless it is [an] ancillary
to a particular injunction in a court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

xxxx228 (Emphasis supplied)

509 | P a g e
In Biraogo v. The Philippine Truth Commission of 2010, 229 the Court instructed that "[i]t
is through the Constitution that the fundamental powers of government are established,
limited and defined, and by which these powers are distributed among the several
departments. The Constitution is the basic and paramount law to which all other laws
must conform and to which all persons, including the highest officials of the land, must
defer." It would then follow that laws that do not conform to the Constitution shall be
stricken down for being unconstitutional.230

However, despite the ostensible breach of the separation of powers principle, the Court
is not oblivious to the policy considerations behind the first paragraph of Section 14, RA
6770, as well as other statutory provisions of similar import. Thus, pending deliberation
on whether or not to adopt the same, the Court, under its sole prerogative and
authority over all matters of procedure, deems it proper to declare as ineffective the
prohibition against courts other than the Supreme Court from issuing provisional
injunctive writs to enjoin investigations conducted by the Office of the Ombudsman,
until it is adopted as part of the rules of procedure through an administrative circular
duly issued therefor.

Hence, with Congress interfering with matters of procedure (through passing the first
paragraph of Section 14, RA 6770) without the Court's consent thereto, it remains that
the CA had the authority to issue the questioned injunctive writs enjoining the
implementation of the preventive suspension order against Binay, Jr. At the risk of
belaboring the point, these issuances were merely ancillary to the exercise of the
CA's certiorari jurisdiction conferred to it under Section 9 (1), Chapter I of BP 129, as
amended, and which it had already acquired over the main CA-G.R. SP No. 139453
case.

IV.

The foregoing notwithstanding, the issue of whether or not the CA gravely abused its
jurisdiction in issuing the TRO and WPI in CA-G.R. SP No. 139453 against the
preventive suspension order is a persisting objection to the validity of said injunctive
writs. For its proper analysis, the Court first provides the context of the assailed
injunctive writs.

A. Subject matter of the CA's iniunctive writs is the preventive suspension

order.

By nature, a preventive suspension order is not a penalty but only a preventive

measure. In Quimbo v. Acting Ombudsman Gervacio,231 the Court explained the
distinction, stating that its purpose is to prevent the official to be suspended
from using his position and the powers and prerogatives of his office to
influence potential witnesses or tamper with records which may be vital in the
prosecution of the case against him:

Jurisprudential law establishes a clear-cut distinction between suspension as preventive

measure and suspension as penalty. The distinction, by considering the purpose aspect
of the suspensions, is readily cognizable as they have different ends sought to be
achieved.

510 | P a g e
Preventive suspension is merely a preventive measure, a preliminary step in
an administrative investigation. The purpose of the suspension order is to
prevent the accused from using his position and the powers and prerogatives
of his office to influence potential witnesses or tamper with records which may
be vital in the prosecution of the case against him. If after such investigation, the
charge is established and the person investigated is found guilty of acts warranting his
suspension or removal, then he is suspended, removed or dismissed. This is the
penalty.

That preventive suspension is not a penalty is in fact explicitly provided by Section 24

of Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of
1987 (Executive Order No. 292) and other Pertinent Civil Service Laws.
Section. 24. Preventive suspension is not a punishment or penalty for misconduct in
office but is considered to be a preventive measure. (Emphasis supplied) ChanRoblesVirtualawlibrary

Not being a penalty, the period within which one is under preventive suspension is not
considered part of the actual penalty of suspension. So Section 25 of the same Rule XIV
provides: chanRoblesvirtualLawlibrary

Section 25. The period within which a public officer or employee charged is placed
under preventive suspension shall not be considered part of the actual penalty of
suspension imposed upon the employee found guilty.232 (Emphases supplied) ChanRoblesVirtualawlibrary

The requisites for issuing a preventive suspension order are explicitly stated in Section
24, RA 6770:

Section 24. Preventive Suspension. - The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such
officer or employee involves dishonesty, oppression or grave misconduct or
neglect in the performance of duty; (b) the charges would warrant removal
from the service; or (c) the respondent's continued stay in office may
prejudice the case filed against him.

The preventive suspension shall continue until the case is terminated by the Office of
the Ombudsman but not more than six (6) months, without pay, except when the delay
in the disposition of the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of such delay shall
not be counted in computing the period of suspension herein provided. (Emphasis and
underscoring supplied)

In other words, the law sets forth two (2) conditions that must be satisfied to justify the
issuance of an order of preventive suspension pending an investigation, namely:

(1) The evidence of guilt is strong; and

(2) Either of the following circumstances co-exist with the first requirement: chanRoblesvirtualLawlibrary

(a) The charge involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; cralawlawlibrary

511 | P a g e
(b) The charge would warrant removal from the service; or

(c) The respondent's continued stay in office may prejudice the case filed against
him.233ChanRoblesVirtualawlibrary

B. The basis of the CA's injunctive writs is the condonation doctrine.

Examining the CA's Resolutions in CA-G.R. SP No. 139453 would, however, show that
the Ombudsman's non-compliance with the requisites provided in Section 24, RA 6770
was not the basis for the issuance of the assailed injunctive writs.

The CA's March 16, 2015 Resolution which directed the issuance of the assailed TRO
was based on the case of Governor Garcia, Jr. v. CA234 (Governor Garcia, Jr.),
wherein the Court emphasized that "if it were established in the CA that the acts
subject of the administrative complaint were indeed committed during petitioner
[Garcia's] prior term, then, following settled jurisprudence, he can no longer be
administratively charged."235 Thus, the Court, contemplating the application of the
condonation doctrine, among others, cautioned, in the said case, that "it would have
been more prudent for [the appellate court] to have, at the very least, on account of
the extreme urgency of the matter and the seriousness of the issues raised in
the certiorari petition, issued a TRO x x x"236 during the pendency of the proceedings.

Similarly, the CA's April 6, 2015 Resolution which directed the issuance of the assailed
WPI was based on the condonation doctrine, citing the case of Aguinaldo v.
Santos237 The CA held that Binay, Jr. has an ostensible right to the final relief prayed
for, i.e., the nullification of the preventive suspension order, finding that the
Ombudsman can hardly impose preventive suspension against Binay, Jr. given that his
re-election in 2013 as City Mayor of Makati condoned any administrative liability arising
from anomalous activities relative to the Makati Parking Building project from 2007 to
2013.238 Moreover, the CA observed that although there were acts which were
apparently committed by Binay, Jr. beyond his first term , i.e., the alleged payments on
July 3, 4, and 24, 2013,239 corresponding to the services of Hillmarc's and MANA - still,
Binay, Jr. cannot be held administratively liable therefor based on the cases
of Salalima v. Guingona, Jr.,240 and Mayor Garcia v. Mojica,241 wherein the
condonation dobtrine was applied by the Court although the payments were made after
the official's election, reasoning that the payments were merely effected pursuant to
contracts executed before said re-election.242

The Ombudsman contends that it was inappropriate for the CA to have considered the
condonation doctrine since it was a matter of defense which should have been raised
and passed upon by her office during the administrative disciplinary
proceedings.243 However, the Court agrees with the CA that it was not precluded from
considering the same given that it was material to the propriety of according provisional
injunctive relief in conformity with the ruling in Governor Garcia, Jr., which was the
subsisting jurisprudence at that time. Thus, since condonation was duly raised by
Binay, Jr. in his petition in CA-G.R. SP No. 139453,244 the CA did not err in passing upon
the same. Note that although Binay, Jr. secondarily argued that the evidence of guilt
against him was not strong in his petition in CA-G.R. SP No. 139453,245 it appears that
the CA found that the application of the condonation doctrine was already sufficient to
enjoin the implementation of the preventive suspension order. Again, there is nothing

512 | P a g e
aberrant with this since, as remarked in the same case of Governor Garcia, Jr., if it was
established that the acts subject of the administrative complaint were indeed
committed during Binay, Jr.'s prior term, then, following the condonation doctrine, he
can no longer be administratively charged. In other words, with condonation having
been invoked by Binay, Jr. as an exculpatory affirmative defense at the onset, the CA
deemed it unnecessary to determine if the evidence of guilt against him was strong, at
least for the purpose of issuing the subject injunctive writs.

With the preliminary objection resolved and the basis of the assailed writs herein laid
down, the Court now proceeds to determine if the CA gravely abused its discretion in
applying the condonation doctrine.

C. The origin of the condonation doctrine.

Generally speaking, condonation has been defined as "[a] victim's express or implied
forgiveness of an offense, [especially] by treating the offender as if there had been
no offense."246

The condonation doctrine - which connotes this same sense of complete extinguishment
of liability as will be herein elaborated upon - is not based on statutory law. It is a
jurisprudential creation that originated from the 1959 case of Pascual v. Hon.
Provincial Board ofNueva Ecija,247 (Pascual),  which was therefore decided under the
1935 Constitution.

In Pascual, therein petitioner, Arturo Pascual, was elected Mayor of San Jose, Nueva
Ecija, sometime in November 1951, and was later re-elected to the same position in
1955. During his second term, or on October 6, 1956, the Acting Provincial Governor
filed administrative charges before the Provincial Board of Nueva Ecija against him
for grave abuse of authority and usurpation of judicial functions for acting on a criminal
complaint in Criminal Case No. 3556 on December 18 and 20, 1954. In defense, Arturo
Pascual argued that he cannot be made liable for the acts charged against him since
they were committed during his previous term of office, and therefore, invalid grounds
for disciplining him during his second term. The Provincial Board, as well as the Court of
First Instance of Nueva Ecija, later decided against Arturo Pascual, and when the case
reached this Court on appeal, it recognized that the controversy posed a novel issue -
that is, whether or not an elective official may be disciplined for a wrongful act
committed by him during his immediately preceding term of office.

As there was no legal precedent on the issue at that time, the Court,
in Pascual, resorted to American authorities and "found that cases on the matter
are conflicting due in part, probably, to differences in statutes and constitutional
provisions, and also, in part, to a divergence of views with respect to the question of
whether the subsequent election or appointment condones the prior
misconduct."248Without going into the variables of these conflicting views and
cases, it proceeded to state that:

The weight of authorities x x x seems to incline toward the rule denying the
right to remove one from office because of misconduct during a prior term, to
which we fully subscribe.249 (Emphasis and underscoring supplied)

513 | P a g e
The conclusion is at once problematic since this Court has now uncovered that there is
really no established weight of authority in the United States (US) favoring the doctrine
of condonation, which, in the words of Pascual, theorizes that an official's re-election
denies the right to remove him from office due to a misconduct during a prior term. In
fact, as pointed out during the oral arguments of this case, at least seventeen (17)
states in the US have abandoned the condonation doctrine.250 The Ombudsman aptly
cites several rulings of various US State courts, as well as literature published on the
matter, to demonstrate the fact that the doctrine is not uniformly applied across all
state jurisdictions. Indeed, the treatment is nuanced:

(1) For one, it has been widely recognized that the propriety of removing a public
officer from his current term or office for misconduct which he allegedly committed in a
prior term of office is governed by the language of the statute or constitutional
provision applicable to the facts of a particular case (see In Re Removal of Member of
Council Coppola).251 As an example, a Texas statute, on the one hand, expressly allows
removal only for an act committed during a present term: "no officer shall be
prosecuted or removed from office for any act he may have committed prior to his
election to office" (see State ex rel. Rowlings v. Loomis).252 On the other hand, the
Supreme Court of Oklahoma allows removal from office for "acts of commission,
omission, or neglect committed, done or omitted during a previous or preceding term of
office" (see State v. Bailey)253 Meanwhile, in some states where the removal statute is
silent or unclear, the case's resolution was contingent upon the interpretation of the
phrase "in office." On one end, the Supreme Court of Ohio strictly construed a removal
statute containing the phrase "misfeasance of malfeasance in office" and thereby
declared that, in the absence of clear legislative language making, the word "office"
must be limited to the single term during which the offense charged against the public
officer occurred (see State ex rel. Stokes v. Probate Court of Cuyahoga
County)254 Similarly, the Common Pleas Court of Allegheny County, Pennsylvania
decided that the phrase "in office" in its state constitution was a time limitation with
regard to the grounds of removal, so that an officer could not be removed for
misbehaviour which occurred; prior to the taking of the office (see Commonwealth v.
Rudman)255 The opposite was construed in the Supreme Court of Louisiana which took
the view that an officer's inability to hold an office resulted from the commission of
certain offenses, and at once rendered him unfit to continue in office, adding the fact
that the officer had been re-elected did not condone or purge the offense (see  State ex
rel. Billon v. Bourgeois).256 Also, in the Supreme Court of New York, Apellate Division,
Fourth Department, the court construed the words "in office" to refer not to a particular
term of office but to an entire tenure; it stated that the whole purpose of the legislature
in enacting the statute in question could easily be lost sight of, and the intent of the
law-making body be thwarted, if an unworthy official could not be removed during one
term for misconduct for a previous one (Newman v. Strobel).257

(2) For another, condonation depended on whether or not the public officer was a
successor in the same office for which he has been administratively charged. The "own-
successor theory," which is recognized in numerous States as an exception to
condonation doctrine, is premised on the idea that each term of a re-elected incumbent
is not taken as separate and distinct, but rather, regarded as one continuous term of
office. Thus, infractions committed in a previous term are grounds for removal because
a re-elected incumbent has no prior term to speak of258 (see Attorney-General v.

514 | P a g e
Tufts;259State v. Welsh;260Hawkins v. Common Council of Grand Rapids;261Territory v.
Sanches;262 and Tibbs v. City of Atlanta).263

(3) Furthermore, some State courts took into consideration the continuing nature of an
offense in cases where the condonation doctrine was invoked. In State ex rel. Douglas
v. Megaarden,264 the public officer charged with malversation of public funds was denied
the defense of condonation by the Supreme Court of Minnesota, observing that "the
large sums of money illegally collected during the previous years are still retained by
him." In State ex rel. Beck v. Harvey265 the Supreme Court of Kansas ruled that "there
is no necessity" of applying the condonation doctrine since "the misconduct continued in
the present term of office[;] [thus] there was a duty upon defendant to restore this
money on demand of the county commissioners." Moreover, in State ex rel.
Londerholm v. Schroeder,266 the Supreme Court of Kansas held that "insofar as
nondelivery and excessive prices are concerned, x x x there remains a continuing duty
on the part of the defendant to make restitution to the country x x x, this duty extends
into the present term, and neglect to discharge it constitutes misconduct."

Overall, the foregoing data clearly contravenes the preliminary conclusion

in Pascual that there is a "weight of authority" in the US on the condonation doctrine.
In fact, without any cogent exegesis to show that Pascual had accounted for the
numerous factors relevant to the debate on condonation, an outright adoption of the
doctrine in this jurisdiction would not have been proper.

At any rate, these US cases are only of persuasive value in the process of this Court's
decision-making. "[They] are not relied upon as precedents, but as guides of
interpretation."267 Therefore, the ultimate analysis is on whether or not the condonation
doctrine, as espoused in Pascual, and carried over in numerous cases after, can be held
up against prevailing legal norms. Note that the doctrine of stare decisis does not
preclude this Court from revisiting existing doctrine. As adjudged in the case of Belgica,
the stare decisis rule should not operate when there are powerful countervailing
considerations against its application.268 In other words, stare decisis becomes an
intractable rule only when circumstances exist to preclude reversal of standing
precedent.269 As the Ombudsman correctly points out, jurisprudence, after all, is not a
rigid, atemporal abstraction; it is an organic creature that develops and devolves along
with the society within which it thrives.270 In the words of a recent US Supreme Court
Decision, "[w]hat we can decide, we can undecide."271

In this case, the Court agrees with the Ombudsman that since the time Pascual  was
decided, the legal landscape has radically shifted. Again, Pascual was a 1959 case
decided under the 1935 Constitution, which dated provisions do not reflect the
experience of the Filipino People under the 1973 and 1987 Constitutions. Therefore, the
plain difference in setting, including, of course, the sheer impact of the condonation
doctrine on public accountability, calls for Pascual's judicious re-examination.

D. Testing the Condonation Doctrine.

Pascual's ratio decidendi may be dissected into three (3) parts:

First, the penalty of removal may not be extended beyond the term in which the public
officer was elected for each term is separate and distinct:

515 | P a g e
Offenses committed, or acts done, during previous term are generally held not
to furnish cause for removal and this is especially true where the constitution
provides that the penalty in proceedings for removal shall not extend beyond the
removal from office, and disqualification from holding office for the term for
which the officer was elected or appointed. (67 C.J.S. p. 248, citing Rice vs.
State, 161 S.W. 2d. 401; Montgomery vs. Nowell, 40 S.W. 2d. 418; People ex
rel. Bagshaw vs. Thompson, 130 P. 2d. 237; Board of Com'rs of Kingfisher County vs.
Shutter, 281 P. 222; State vs. Blake,  280 P. 388; In re Fudula, 147 A. 67;  State vs.
Ward, 43 S.W. 2d. 217).
The underlying theory is that each term is separate from other terms x x x.272

Second, an elective official's re-election serves as a condonation of previous

misconduct, thereby cutting the right to remove him therefor; and

[T]hat the  reelection to office operates as a condonation of the officer's previous

misconduct to the extent of cutting off the right to remove him therefor. (43 Am. Jur. p.
45, citing Atty. Gen. vs. Hasty, 184 Ala. 121, 63 So. 559, 50 L.R.A. (NS)
553.273 (emphasis supplied)

Third, courts may not deprive the electorate, who are assumed to have known the life
and character of candidates, of their right to elect officers:

As held in  Conant vs. Grogan (1887) 6 N.Y.S.R. 322, cited in 17 A.I.R. 281, 63 So. 559,
50 LRA (NS) 553 —
The Court should never remove a public officer for acts done prior to his present term
of office. To do otherwise would be to deprive the people of their right to elect their
officers. When the people have elected a man to office, it must be assumed that
they did this with knowledge of his life and character, and that they
disregarded or forgave his faults or misconduct, if he had been guilty of any. It
is not for the court, by reason of such faults or misconduct to practically overrule the
will of the people.274 (Emphases supplied)

The notable cases on condonation following Pascual are as follows:

(1) Lizares v. Hechanova275 (May 17, 1966) - wherein the Court first applied the
condonation doctrine, thereby quoting the above-stated passages from Pascual in
verbatim.

(2) Insco v. Sanchez, et al.276 (December 18, 1967) - wherein the Court clarified that
the condonation doctrine does not apply to a criminal case. It was explained that a
criminal case is different from an administrative case in that the former involves the
People of the Philippines as a community, and is a public wrong to the State at large;
whereas, in the latter, only the populace of the constituency he serves is affected. In
addition, the Court noted that it is only the President who may pardon a criminal
offense.

(3) Aguinaldo v. Santos277 (Aguinaldo; August 21, 1992) - a case decided under the

1987 Constitution wherein the condonation doctrine was applied in favor of then
Cagayan Governor Rodolfo E. Aguinaldo although his re-election merely supervened

516 | P a g e
the pendency of, the proceedings.

(4) Salalima v. Guinsona, Jr.278 (Salalima; May 22, 1996) -wherein the

Court reinforced the condonation doctrine by stating that the same is justified
by "sound public policy." According to the Court, condonation prevented the elective
official from being "hounded" by administrative cases filed by his "political enemies"
during a new term, for which he has to defend himself "to the detriment of public
service." Also, the Court mentioned that the administrative liability condoned by re-
election covered the execution of the contract and the incidents related therewith.279

(5) Mayor Garcia v. Mojica280 (Mayor Garcia; September 10, 1999) - wherein the

benefit of the doctrine was extended to then Cebu City Mayor Alvin B. Garcia who was
administratively charged for his involvement in an anomalous contract for the supply of
asphalt for Cebu City, executed only four (4) days before the upcoming elections. The
Court ruled that notwithstanding the timing of the contract's execution, the electorate is
presumed to have known the petitioner's background and character, including his past
misconduct; hence, his subsequent re-election was deemed a condonation of his prior
transgressions. More importantly, the Court held that the determinative time element in
applying the condonation doctrine should be the time when the contract was
perfected; this meant that as long as the contract was entered into during a
prior term, acts which were done to implement the same, even if done during
a succeeding term, do not negate the application of the condonation doctrine
in favor of the elective official.

(6) Salumbides, Jr. v. Office of the Ombudsman 281 (Salumbides, Jr.; April 23,

2010) - wherein the Court explained the doctrinal innovations in
the Salalima and Mayor Garcia rulings, to wit:

Salalima v. Guingona, Jr. and Mayor Garcia v. Hon. Mojica  reinforced the doctrine. The

condonation rule was applied even if the administrative complaint was not
filed before the reelection of the public official, and even if the alleged
misconduct occurred four days before the elections, respectively. Salalima did
not distinguish as to the date of filing of the administrative complaint, as long as the
alleged misconduct was committed during the prior term, the precise timing or period
of which Garcia did not further distinguish, as long as the wrongdoing that gave rise to
the public official's culpability was committed prior to the date of
reelection.282 (Emphasis supplied)ChanRoblesVirtualawlibrary

The Court, citing Civil Service Commission v. Sojor,283 also clarified that the

condonation doctrine would not apply to appointive officials since, as to them,
there is no sovereign will to disenfranchise.

(7) And finally, the above discussed case of Governor Garcia, Jr. -wherein the Court
remarked that it would have been prudent for the appellate court therein to have issued
a temporary restraining order against the implementation of a preventive suspension
order issued by the Ombudsman in view of the condonation doctrine.

A thorough review of the cases post-1987, among others, Aguinaldo, Salalima, Mayor

Garcia, and Governor Garcia, Jr. - all cited by the CA to justify its March 16, 2015 and
April 6, 2015 Resolutions directing the issuance of the assailed injunctive writs - would

517 | P a g e
show that the basis for condonation under the prevailing constitutional and statutory
framework was never accounted for. What remains apparent from the text of these
cases is that the basis for condonation, as jurisprudential doctrine, was - and still
remains - the above-cited postulates of Pascual, which was lifted from rulings of US
courts where condonation was amply supported by their own state laws. With respect to
its applicability to administrative cases, the core premise of condonation - that is, an
elective official's re-election cuts qff the right to remove him for an administrative
offense committed during a prior term - was adopted hook, line, and sinker in our
jurisprudence largely because the legality of that doctrine was never tested against
existing legal norms. As in the US, the propriety of condonation is - as it should be
-dependent on the legal foundation of the adjudicating jurisdiction. Hence, the Court
undertakes an examination of our current laws in order to determine if there is legal
basis for the continued application of the doctrine of condonation.

The foundation of our entire legal system is the Constitution. It is the supreme law of
the land;284 thus, the unbending rule is that every statute should be read in light of the
Constitution.285 Likewise, the Constitution is a framework of a workable government;
hence, its interpretation must take into account the complexities, realities, and politics
attendant to the operation of the political branches of government.286

As earlier intimated, Pascual  was a decision promulgated in 1959. Therefore, it was

decided within the context of the 1935 Constitution which was silent with respect to
public accountability, or of the nature of public office being a public trust. The provision
in the 1935 Constitution that comes closest in dealing with public office is Section 2,
Article II which states that "[t]he defense of the State is a prime duty of government,
and in the fulfillment of this duty all citizens may be required by law to render personal
military or civil service."287 Perhaps owing to the 1935 Constitution's silence on public
accountability, and considering the dearth of jurisprudential rulings on the matter, as
well as the variance in the policy considerations, there was no glaring objection
confronting the Pascual  Court in adopting the condonation doctrine that originated from
select US cases existing at that time.

With the advent of the 1973 Constitution, the approach in dealing with public officers
underwent a significant change. The new charter introduced an entire article on
accountability of public officers, found in Article XIII. Section 1 thereof positively
recognized, acknowledged, and declared that "[p]ublic office is a public trust."
Accordingly, "[p]ublic officers and employees shall serve with the highest
degree of responsibility, integrity, loyalty and efficiency, and shall remain
accountable to the people."

After the turbulent decades of Martial Law rule, the Filipino People have framed and
adopted the 1987 Constitution, which sets forth in the Declaration of Principles and
State Policies in Article II that "[t]he State shall maintain honesty and integrity in
the public service and take positive and effective measures against graft and
corruption."288 Learning how unbridled power could corrupt public servants under the
regime of a dictator, the Framers put primacy on the integrity of the public service by
declaring it as a constitutional principle and a State policy. More significantly, the 1987
Constitution strengthened and solidified what has been first proclaimed in the 1973
Constitution by commanding public officers to be accountable to the people at all
times:

518 | P a g e
Section 1. Public office is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency and act with patriotism and justice, and lead
modest lives. ChanRoblesVirtualawlibrary

In Belgica, it was explained that:

[t]he aphorism forged under Section 1, Article XI of the 1987 Constitution, which states
that "public office is a public trust," is an overarching reminder that every
instrumentality of government should exercise their official functions only in accordance
with the principles of the Constitution which embodies the parameters of the people's
trust. The notion of a public trust connotes accountability x x x.289 (Emphasis
supplied) ChanRoblesVirtualawlibrary

The same mandate is found in the Revised Administrative Code under the section of the
Civil Service Commission,290 and also, in the Code of Conduct and Ethical Standards for
Public Officials and Employees.291

For local elective officials like Binay, Jr., the grounds to discipline, suspend or
remove an elective local official from office are stated in Section 60 of Republic
Act No. 7160,292 otherwise known as the "Local Government Code of 1991" (LGC),
which was approved on October 10 1991, and took effect on January 1, 1992:

Section 60. Grounds for Disciplinary Action. - An elective local official may be

disciplined, suspended, or removed from office on any of the r following grounds: chanRoblesvirtualLawlibrary

(a) Disloyalty to the Republic of the Philippines; cralawlawlibrary

(b) Culpable violation of the Constitution; cralawlawlibrary

(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of

duty; cralawlawlibrary

(d) Commission of any offense involving moral turpitude or an offense punishable by at

least prision mayor; cralawlawlibrary

(e) Abuse of authority; cralawlawlibrary

(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case
of members of the sangguniang panlalawigan, sangguniang panlunsod, sanggunian
bayan, and sangguniang barangay; cralawlawlibrary

(g) Application for, or acquisition of, foreign citizenship or residence or the status of an
immigrant of another country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds enumerated above
by order of the proper court.

Related to this provision is Section 40 (b) of the LGC which states that those

removed from office as a result of an administrative case shall be disqualified
from running for any elective local position:

Section 40. Disqualifications. - The following persons are disqualified from running for
any elective local position:

xxxx

519 | P a g e
(b) Those removed from office as a result of an administrative case;

x x x x (Emphasis supplied) ChanRoblesVirtualawlibrary

In the same sense, Section 52 (a) of the RRACCS provides that the penalty of
dismissal from service carries the accessory penalty of perpetual
disqualification from holding public office:

Section 52. - Administrative Disabilities Inherent in Certain Penalties. -

a. The penalty of dismissal shall carry with it cancellation of eligibility,

forfeiture of retirement benefits, perpetual disqualification from holding
public office, and bar from taking the civil service examinations.

In contrast, Section 66 (b) of the LGC states that the penalty of suspension shall not
exceed the unexpired term of the elective local official nor constitute a bar to his
candidacy for as long as he meets the qualifications required for the office. Note,
however, that the provision only pertains to the duration of the penalty and its effect on
the official's candidacy. Nothing therein states that the administrative liability
therefor is extinguished by the fact of re-election:

Section 66. Form and Notice of Decision. - x x x.

xxxx

(b) The penalty of suspension shall not exceed the unexpired term of the respondent or
a period of six (6) months for every administrative offense, nor shall said penalty be a
bar to the candidacy of the respondent so suspended as long as he meets the
qualifications required for the office.

Reading the 1987 Constitution together with the above-cited legal provisions now leads
this Court to the conclusion that the doctrine of condonation is actually bereft of legal
bases.

To begin with, the concept of public office is a public trust and the corollary
requirement of accountability to the people at all times, as mandated under the
1987 Constitution, is plainly inconsistent with the idea that an elective local official's
administrative liability for a misconduct committed during a prior term can be wiped off
by the fact that he was elected to a second term of office, or even another elective
post. Election is not a mode of condoning an administrative offense, and there is
simply no constitutional or statutory basis in our jurisdiction to support the notion that
an official elected for a different term is fully absolved of any administrative liability
arising from an offense done during a prior term. In this jurisdiction, liability arising
from administrative offenses may be condoned bv the President in light of
Section 19, Article VII of the 1987 Constitution which was interpreted in Llamas v.
Orbos293 to apply to administrative offenses:

520 | P a g e
The Constitution does not distinguish between which cases executive clemency may be
exercised by the President, with the sole exclusion of impeachment cases. By the same
token, if executive clemency may be exercised only in criminal cases, it would indeed
be unnecessary to provide for the exclusion of impeachment cases from the coverage of
Article VII, Section 19 of the Constitution. Following petitioner's proposed
interpretation, cases of impeachment are automatically excluded inasmuch as the same
do not necessarily involve criminal offenses.

In the same vein, We do not clearly see any valid and convincing , reason why the
President cannot grant executive clemency in administrative cases. It is Our considered
view that if the President can grant reprieves, commutations and pardons, and remit
fines and forfeitures in criminal cases, with much more reason can she grant executive
clemency in administrative cases, which are clearly less serious than criminal offenses.

Also, it cannot be inferred from Section 60 of the LGC that the grounds for discipline
enumerated therein cannot anymore be invoked against an elective local official to hold
him administratively liable once he is re-elected to office. In fact, Section 40 (b) of the
LGC precludes condonation since in the first place, an elective local official who is meted
with the penalty of removal could not be re-elected to an elective local position due to a
direct disqualification from running for such post. In similar regard, Section 52 (a) of
the RRACCS imposes a penalty of perpetual disqualification from holding public office as
an accessory to the penalty of dismissal from service.

To compare, some of the cases adopted in Pascual were decided by US State

jurisdictions wherein the doctrine of condonation of administrative liability was
supported by either a constitutional or statutory provision stating, in effect, that an
officer cannot be removed by a misconduct committed during a previous term,294 or
that the disqualification to hold the office does not extend beyond the term in
which the official's delinquency occurred. 295 In one case,296 the absence of a
provision against the re-election of an officer removed - unlike Section 40 (b) of the
LGC-was the justification behind condonation. In another case,297 it was deemed that
condonation through re-election was a policy under their constitution - which
adoption in this jurisdiction runs counter to our present Constitution's requirements on
public accountability. There was even one case where the doctrine of condonation was
not adjudicated upon but only invoked by a party as a ground;298 while in another case,
which was not reported in full in the official series, the crux of the disposition was that
the evidence of a prior irregularity in no way pertained to the charge at issue and
therefore, was deemed to be incompetent.299 Hence, owing to either their variance or
inapplicability, none of these cases can be used as basis for the continued adoption of
the condonation doctrine under our existing laws.

At best, Section 66 (b) of the LGC prohibits the enforcement of the penalty of

suspension beyond the unexpired portion of the elective local official's prior term, and
likewise allows said official to still run for re-election This treatment is similar to People
ex rel Bagshaw v. Thompson300 and Montgomery v. Novell301 both cited
in Pascual, wherein it was ruled that an officer cannot be suspended for a misconduct
committed during a prior term. However, as previously stated, nothing in Section 66 (b)
states that the elective local official's administrative liability is extinguished by the fact
of re-election. Thus, at all events, no legal provision actually supports the theory that
the liability is condoned.

521 | P a g e
Relatedly it should be clarified that there is no truth in Pascual's postulation that the
courts would be depriving the electorate of their right to elect their officers if
condonation were not to be sanctioned. In political law, election pertains to the process
by which a particular constituency chooses an individual to hold a public office. In this
jurisdiction, there is, again, no legal basis to conclude that election automatically
implies condonation. Neither is there any legal basis to say that every democratic and
republican state has an inherent regime of condonation. If condonation of an elective
official's administrative liability would perhaps, be allowed in this jurisdiction, then the
same should have been provided by law under our governing legal mechanisms. May it
be at the time of Pascual or at present, by no means has it been shown that such a law,
whether in a constitutional or statutory provision, exists. Therefore, inferring from this
manifest absence, it cannot be said that the electorate's will has been abdicated.

Equally infirm is Pascual's proposition that the electorate, when re-electing a local

official, are assumed to have done so with knowledge of his life and character, and that
they disregarded or forgave his faults or misconduct, if he had been guilty of any.
Suffice it to state that no such presumption exists in any statute or procedural
rule.302 Besides, it is contrary to human experience that the electorate would have full
knowledge of a public official's misdeeds. The Ombudsman correctly points out the
reality that most corrupt acts by public officers are shrouded in secrecy, and concealed
from the public. Misconduct committed by an elective official is easily covered
up, and is almost always unknown to the electorate when they cast their
votes.303 At a conceptual level, condonation presupposes that the condoner has actual
knowledge of what is to be condoned. Thus, there could be no condonation of an
act that is unknown. As observed in Walsh v. City Council of Trenton304 decided by
the New Jersey Supreme Court:

Many of the cases holding that re-election of a public official prevents his removal for
acts done in a preceding term of office are reasoned out on the theory of condonation.
We cannot subscribe to that theory because condonation, implying as it does
forgiveness, connotes knowledge and in the absence of knowledge there can be no
condonation. One cannot forgive something of which one has no knowledge.

That being said, this Court simply finds no legal authority to sustain the condonation
doctrine in this jurisdiction. As can be seen from this discourse, it was a doctrine
adopted from one class of US rulings way back in 1959 and thus, out of touch from -
and now rendered obsolete by - the current legal regime. In consequence, it is high
time for this Court to abandon the condonation doctrine that originated from Pascual,
and affirmed in the cases following the same, such as Aguinaldo, Salalima, Mayor
Garcia, and Governor Garcia, Jr. which were all relied upon by the CA.

It should, however, be clarified that this Court's abandonment of the condonation

doctrine should be prospective in application for the reason that judicial decisions
applying or interpreting the laws or the Constitution, until reversed, shall form part of
the legal system of the Philippines.305 Unto this Court devolves the sole authority to
interpret what the Constitution means, and all persons are bound to follow its
interpretation. As explained in De Castro v. Judicial Bar Council.306

522 | P a g e
Judicial decisions assume the same authority as a statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are applicable, the criteria that
must control the actuations, not only of those called upon to abide by them, but also of
those duty-bound to enforce obedience to them.307

Hence, while the future may ultimately uncover a doctrine's error, it should be, as a
general rule, recognized as "good law" prior to its abandonment. Consequently, the
people's reliance thereupon should be respected. The landmark case on this matter
is People v. Jabinal,308 wherein it was ruled:

[W]hen a doctrine of this Court is overruled and a different view is adopted, the new
doctrine should be applied prospectively, and should not apply to parties who had relied
on the old doctrine and acted on the faith thereof.

Later, in Spouses Benzonan v. CA,309 it was further elaborated:

[Pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the
laws or the Constitution shall form a part of the legal system of the Philippines." But
while our decisions form part of the law of the land, they are also subject to Article 4 of
the Civil Code which provides that "laws shall have no retroactive effect unless the
contrary is provided." This is expressed in the familiar legal maxim  lex prospicit, non
respicit, the law looks forward not backward. The rationale against retroactivity is easy
to perceive. The retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is
unconstitutional.310
ChanRoblesVirtualawlibrary

Indeed, the lessons of history teach us that institutions can greatly benefit from
hindsight and rectify its ensuing course. Thus, while it is truly perplexing to think that a
doctrine which is barren of legal anchorage was able to endure in our jurisprudence for
a considerable length of time, this Court, under a new membership, takes up the
cudgels and now abandons the condonation doctrine.

E. Consequence of ruling.

As for this section of the Decision, the issue to be resolved is whether or not
the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the assailed injunctive writs.

It is well-settled that an act of a court or tribunal can only be considered as with grave
abuse of discretion when such act is done in a capricious or whimsical exercise
of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must
be so patent and gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason of passion
and hostility.311 It has also been held that "grave abuse of discretion arises when a
lower court or tribunal patently violates the Constitution, the law or existing
jurisprudence."312

As earlier established, records disclose that the CA's resolutions directing the issuance

523 | P a g e
of the assailed injunctive writs were all hinged on cases enunciating the condonation
doctrine. To recount, the March 16, 2015 Resolution directing the issuance of the
subject TRO was based on the case of Governor Garcia, Jr., while the April 6, 2015
Resolution directing the issuance of the subject WPI was based on the cases
of Aguinaldo, Salalima, Mayor Garcia, and again, Governor Garcia, Jr. Thus, by merely
following settled precedents on the condonation doctrine, which at that time,
unwittingly remained "good law," it cannot be concluded that the CA committed a grave
abuse of discretion based on its legal attribution above. Accordingly, the WPI against
the Ombudsman's preventive suspension order was correctly issued.

With this, the ensuing course of action should have been for the CA to resolve the main
petition for certiorari in CA-G.R. SP No. 139453 on the merits. However, considering
that the Ombudsman, on October 9, 2015, had already found Binay, Jr. administratively
liable and imposed upon him the penalty of dismissal, which carries the accessory
penalty of perpetual disqualification from holding public office, for the present
administrative charges against him, the said CA petition appears to have been
mooted.313 As initially intimated, the preventive suspension order is only an ancillary
issuance that, at its core, serves the purpose of assisting the Office of the Ombudsman
in its investigation. It therefore has no more purpose - and perforce, dissolves - upon
the termination of the office's process of investigation in the instant administrative
case.

F. Exceptions to the mootness principle.

This notwithstanding, this Court deems it apt to clarify that the mootness of the issue
regarding the validity of the preventive suspension order subject of this case does not
preclude any of its foregoing determinations, particularly, its abandonment of the
condonation doctrine. As explained in Belgica, '"the moot and academic principle' is not
a magical formula that can automatically dissuade the Court in resolving a case. The
Court will decide cases, otherwise moot, if: first, there is a grave violation of the
Constitution; second, the exceptional character of the situation and the paramount
public interest is involved; third, when the constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar, and the public;
and fourth, the case is capable of repetition yet evading review."314 All of these
scenarios obtain in this case:

First, it would be a violation of the Court's own duty to uphold and defend the
Constitution if it were not to abandon the condonation doctrine now that its infirmities
have become apparent. As extensively discussed, the continued application of the
condonation doctrine is simply impermissible under the auspices of the present
Constitution which explicitly mandates that public office is a public trust and that public
officials shall be accountable to the people at all times.

Second, the condonation doctrine is a peculiar jurisprudential creation that has

persisted as a defense of elective officials to escape administrative liability. It is the first
time that the legal intricacies of this doctrine have been brought to light; thus, this is a
situation of exceptional character which this Court must ultimately resolve. Further,
since the doctrine has served as a perennial obstacle against exacting public
accountability from the multitude of elective local officials throughout the years, it is
indubitable that paramount public interest is involved.

524 | P a g e
Third, the issue on the validity of the condonation doctrine clearly requires the
formulation of controlling principles to guide the bench, the bar, and the public. The
issue does not only involve an in-depth exegesis of administrative law principles, but
also puts to the forefront of legal discourse the potency of the accountability provisions
of the 1987 Constitution. The Court owes it to the bench, the bar, and the public to
explain how this controversial doctrine came about, and now, its reasons for
abandoning the same in view of its relevance on the parameters of public office.

And fourth, the defense of condonation has been consistently invoked by elective local
officials against the administrative charges filed against them. To provide a sample size,
the Ombudsman has informed the Court that "for the period of July 2013 to December
2014 alone, 85 cases from the Luzon Office and 24 cases from the Central Office were
dismissed on the ground of condonation. Thus, in just one and a half years, over a
hundred cases of alleged misconduct - involving infractions such as dishonesty,
oppression, gross neglect of duty and grave misconduct - were placed beyond the reach
of the Ombudsman's investigatory and prosecutorial powers."315 Evidently, this fortifies
the finding that the case is capable of repetition and must therefore, not evade review.

In any event, the abandonment of a doctrine is wholly within the prerogative of the
Court. As mentioned, it is its own jurisprudential creation and may therefore, pursuant
to its mandate to uphold and defend the Constitution, revoke it notwithstanding
supervening events that render the subject of discussion moot. chanrobleslaw

V.

With all matters pertaining to CA-G.R. SP No. 139453 passed upon, the Court now rules
on the final issue on whether or not the CA's Resolution316 dated March 20, 2015
directing the Ombudsman to comment on Binay, Jr.'s petition for contempt in CA-G.R.
SP No. 139504 is improper and illegal.

The sole premise of the Ombudsman's contention is that, as an impeachable officer, she
cannot be the subject of a charge for indirect contempt317 because this action is criminal
in nature and the penalty therefor would result in her effective removal from
office.318 However, a reading of the aforesaid March 20, 2015 Resolution does not show
that she has already been subjected to contempt proceedings. This issuance, in? fact,
makes it clear that notwithstanding the directive for the Ombudsman to comment, the
CA has not necessarily given due course to Binay, Jr.'s contempt petition:

Without necessarily giving due course to the Petition for Contempt respondents

[Hon. Conchita Carpio Morales, in her capacity as the Ombudsman, and the Department
of Interior and Local Government] are hereby DIRECTED to file Comment on the
Petition/Amended and Supplemental Petition for Contempt (CA-G.R. SP No. 139504)
within an inextendible period of three (3) days from receipt hereof. (Emphasis and
underscoring supplied) ChanRoblesVirtualawlibrary

Thus, even if the Ombudsman accedes to the CA's directive by filing a comment,
wherein she may properly raise her objections to the contempt proceedings by virtue of
her being an impeachable officer, the CA, in the exercise of its sound judicial discretion,
may still opt not to give due course to Binay, Jr.'s contempt petition and accordingly,

525 | P a g e
dismiss the same. Sjmply put, absent any indication that the contempt petition has
been given due course by the CA, it would then be premature for this Court to rule on
the issue. The submission of the Ombudsman on this score is perforce denied.

WHEREFORE, the petition is PARTLY GRANTED. Under the premises of this Decision,

the Court resolves as follows:

(a) the second paragraph of Section 14 of Republic Act No. 6770 is

declared UNCONSTITUTIONAL, while the policy against the issuance of provisional
injunctive writs by courts other than the Supreme Court to enjoin an investigation
conducted by the Office of the Ombudsman under the first paragraph of the said
provision is DECLARED ineffective until the Court adopts the same as part of the rules
of procedure through an administrative circular duly issued therefor; cralawlawlibrary

(b) The condonation doctrine is ABANDONED, but the abandonment

is PROSPECTIVE in effect; cralawlawlibrary

(c) The Court of Appeals (CA) is DIRECTED to act on respondent Jejomar Erwin S.
Binay, Jr.'s (Binay, Jr.) petition for certiorari in CA-G.R. SP No. 139453 in light of the
Office of the Ombudsman's supervening issuance of its Joint Decision dated October 9,
2015 finding Binay, Jr. administratively liable in the six (6) administrative complamts,
docketed as OMB-C-A-15-0058, OMB-C-A-15-0059, OMB-C-A-15-0060, OMB-C-A-15-
0061, OMB-C-A-15-0062, and OMB-C-A-15-0063; and

(d) After the filing of petitioner Ombudsman Conchita Carpio Morales's comment, the
CA is DIRECTED to resolve Binay, Jr.'s petition for contempt in CA-G.R. SP No. 139504
with utmost dispatch.

SO ORDERED. chanroblesvirtuallawlibrary

526 | P a g e
G.R. No. 200903               July 22, 2014

KALIPUNAN NG DAMAY ANG MAHIBIRAP, INC., represented by its Vice-President, CARLITO

BADION, CORAZON DE JESUS HOMEOWNERS ASSOCIATION, represented by its President,
ARNOLD REPIQUE, FERNANDO SEVILLA as President of Samahang Pamata sa Kapatirang
Kr.istiyano, ESTRELIETA BAGASBAS, JOCY LOPEZ, ELVIRA VIDOL, and DELIA FRA
YRES, Petitioners,
vs.
JESSIE ROBREDO, in his capacity as Secretary, Department of Interior and Local
Government, Hon. GUIA GOMEZ, in her capacity as MAYOR OF THE CITY. OF SAN JUAN,
Hon. HERBERT BAUTISTA, in his capacity as the MAYOR OF QUEZON CITY, Hon. JOHN REY
TIANGCO, in his capacity as MAYOR OF NAVOTAS CITY, and the GENERAL MANAGER of the
NATIONAL HOUSING AUTHORITY, Respondents.

DECISION

BRION, J.:

This is a petition for prohibition and mandamus to enjoin the public respondents from evicting the
individual petitioners as well as the petitionerassociations’ members from their dwellings in the cities
of San Juan, Navotas and Quezon without any court order, and to compel the respondents to afford
them judicial process prior to evictions and demolitions. The petition primarily seeks to declare
asunconstitutional Section 28 (a) and (b) of Republic Act No. 7279 (RA 7279), otherwise known as
Urban Development Housing Act, which authorizes evictions and demolitions under certain
circumstances without any court order.

The Factual Antecedents

The members of petitioners Kalipunan ng Damayang Mahihirap, Inc. and Corazon de Jesus
Homeowners’ Association as well as the individual petitioners, Fernando Sevilla, Estrelieta
Bagasbas, Jocy Lopez, Elvira Vidol and Delia Frayres, were/are occupying parcels of land owned by
and located in the cities of San Juan, Navotas and Quezon (collectively, the LGUs ). These LGUs
1

sent the petitioners notices of eviction and demolition pursuant to Section 28 (a) and (b) of RA 7279
in order to give way to the implementation and construction of infrastructure projects  in the areas
2

illegally occupied by the petitioners.

3

Section 28 (a) and (b) of RA 7279 authorize evictions and demolitions without any court order when:
(1) persons or entities occupy danger areas such as esteros, railroad tracks, garbage dumps,
riverbanks, shorelines, waterways, and other public places suchas sidewalks, roads, parks, and
playgrounds; and (2) persons or entities occupy areas where government infrastructure projects with
available funding are about to be implemented.

The Petition

On March 23, 2012, the petitionersdirectly filed a petition for prohibition and mandamus before the
Court, seeking to compel the Secretary of Interior and Local Government, et al. (the public
respondents)to first secure an eviction and/or demolition order from the court prior to their
implementation of Section 28 (a) and (b) of RA 7279.

527 | P a g e
The petitioners justify their directrecourse before this Court by generally averring that they have no
plain, speedy and adequate remedy in the ordinary course of law.  They also posit that the
4

respondents gravely abused their discretion in implementing Section 28 (a) and (b) of RA 7279
which are patently unconstitutional. They likewise insist that they stand to be directly injured by the
respondents’threats of evictions and demolitions. In the alternative, they contend that the
transcendental public importance of the issues raised in this case clothes them with legal standing. 5

The petitioners argue that Section 28 (a) and (b) of RA 7279 offend their constitutional right to due
process because they warrant evictions and demolitions without any court order. Theypoint out that
Section 6, Article 3 of the 1987 Constitution expressly prohibits the impairment of liberty of abode
unless there is a court order. Moreover, Section 28 (a) and (b) of RA 7279 violate their right to
adequate housing, a universal right recognized in Article 25 of Universal Declaration ofHuman
Rights and Section 2 (a) of RA 7279. The petitioners further complain that the respondents had
previously conducted evictions and demolitions in a violent manner, contrary to Section 10, Article
13 of the 1987 Constitution. 6

The Respondents’ Case

A. The Position of the Mayor of Navotas

The Mayor of Navotas prays for the outright dismissal of the petition for its serious procedural
defects. First, the petitioners ignored the hierarchy of courts when they directly filed a Rule 65
petition before the Court.  Second, the petitioners incorrectly availed themselves of a petition for
7

prohibition and mandamus in assailing the constitutionality of Section 28 (a) and (b) of RA 7279.
According to the Mayor of Navotas, the office of a writ of prohibition is merely to prevent the public
respondent’s usurpation of power or improper assumption of jurisdiction. On the other hand, a writ of
mandamus only commands the public respondent to perform his ministerial functions. Third, the
petitioners failed to particularly state the grave abuse of discretion that the Mayor of Navotas
allegedly committed. Fourth, the petition does not present any justiciable controversy since the City
of Navotas had already successfully evicted the petitioners in San Roque, Navotas on November 28,
2011. Fifth, the petition was filed out of time since the petitioners were personally notified of the
intended eviction and demolition on September 23, 2011. 8

The Mayor argues that Section 10, Article 13 of the 1987 Constitution allows evictions and
demolitions to beconducted even without a court order provided they are done in accordance withthe
law and in a just and humane manner. According to him, RA 7279 isprecisely the law referred to by
Section 10, Article 13 of the 1987 Constitution. The Mayor also disputes the petitioners’ claim that
RA 7279 does notafford the informal settlers procedural due process prior to evictions and
demolitions. He points out that Section 28 of RA 7279 and its implementing rules and regulations
(IRR) mandate that the affected persons or entities shall be given notice at least thirty (30) days prior
to the date of eviction or demolition. The respondents are likewise required to consult with the duly
designated representatives of the affected families and communities with respect to their relocation.
He further asserts that his faithful implementation of Section 28 (a) and (b) of RA 7279, which are
presumed to be constitutional, cannotbe equated to grave abuse of discretion. Lastly, the Mayor of
Navotas insists that the petitioners’ invocation of their right to freely choose their abode is misplaced
since they have no vested right to occupy properties that they do not own. 9

B. The Position of the Mayor of San Juan

The Mayor of San Juan similarly argues that the petitioners improperly availed themselves of a
petition for prohibition and mandamus before the Court. She contends thatshe performed neither
judicial nor ministerial functions in implementing RA 7279, the enabling law of Section 10, Article 13

528 | P a g e
of the 1987 Constitution. She also maintains that the petition has been rendered moot and academic
by the successful eviction of some of the petitioners in Pinaglabanan, Corazon de Jesus, San Juan.
The Mayor of San Juan further stresses that Section 28 (a) and (b) of RA 7279 already lay down the
procedure in evicting informal settlers in a just and humane manner.  C. The Position of the Mayor
10

of Quezon

The Mayor of Quezon City holds that the petitioners’ premature invocation of the Court’s power of
judicial review and their violation of the principle of hierarchy of courts are fatal to their cause of
action. Moreover, the petitioners failed to substantiate the material allegations in the petition. He
additionally argues that his faithful implementation of RA 7279, which the legislature enacted inthe
exercise of police power, does not amount to grave abuse of discretion. 11

D. The Position of the Secretary ofInterior and Local Government

and the General Manager of the National Housing Authority

The Secretary of Interior and Local Government and the National Housing Authority (NHA)General
Manager adopt the Mayor of Navotas’ position that the petition is procedurally infirm. They further
argue that the liberty of abode is not illimitable and does not include the right to encroach upon other
person properties. They also reiterate that Section 28 of RA 7279 provides sufficient safeguards in
ensuring that evictions and demolitions are carried out in a just and humane manner. 12

The Issues

This case presents to us the following issues:

(1) Whether the petition should be dismissed for serious procedural defects; and

(a) Whether the petitioners violated the principle of hierarchy of courts;

(b) Whether the petitioners correctlyavailed themselves of a petition for prohibition

and mandamus;

(2) Whether Section 28 (a) and (b) of RA 7279 are violative of Sections 1 and 6, Article 3 of
the 1987 Constitution.

The Court’s Ruling

We dismiss the petition.

The petitioners violated the principle of hierarchy of courts when they directly filed the petition before
the Court.

The petitioners have unduly disregarded the hierarchy of courts by coming directly to the Court
withtheir petition for prohibition and mandamus. The petitioners appear to have forgotten that the
Supreme Court is a court of last resort, not a court offirst instance. The hierarchy of courts should
serve as a general determinant of the appropriate forum for Rule 65 petitions. The concurrence of
jurisdiction among the Supreme Court, Court of Appeals and the Regional Trial Courts to issue writs
of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction does not give the
petitioners the unrestricted freedom of choice of forum. By directly filing Rule 65 petitions before us,
the petitioners have unduly taxed the Court’s time and attention which are better devoted to matters

529 | P a g e
within our exclusive jurisdiction. Worse, the petitioners only contributed to the overcrowding of the
Court's docket. We also wish to emphasize that the trial court is better equipped to resolve cases
ofthis nature since this Court is not a trier of facts and does not normallyundertake an examination of
the contending parties’ evidence. 13

The petitioners wrongly availed themselves of a petition for prohibition and mandamus.

We cannot also ignore the petitioners’ glaring error in using a petition for prohibition and mandamus
in the current case.

The petitioners seem to have forgotten that a writ of prohibition only lies against the tribunal,
corporation, board, officer or person’s exercise of judicial, quasi-judicial or ministerial functions.  We
14

issue a writ of prohibition to afford the aggrieved party a relief against the respondent’s usurpation or
grave abuse of jurisdiction or power. 15

On the other hand, a petition for mandamus is merely directed against the tribunal, corporation,
board, officer, or person who unlawfully neglects the performance of an act which the law enjoins as
a duty resulting from an office, trust or station or who unlawfully excludes another from the use and
enjoyment of a right or office to which such other is entitled.  Thus, a writ of mandamus will only
16

issue to compel an officer to perform a ministerial duty. It will not control a public officer’s exercise of
discretion as where the law imposes upon him the duty to exercisehis judgment in reference to any
manner in which he is required to actprecisely because it is his judgment that is to be exercised, not
that of the court.
17

In the present case, the petitionersseek to prohibit the respondents from implementing Section 28
(a) and (b) of RA 7279 without a prior court order of eviction and/or demolition. In relation to this,
paragraph 1, Section 28 of RA 7279 provides:

Sec. 28. Eviction and Demolition. — Eviction or demolition as a practice shall be discouraged.
Eviction or demolition, however, maybe allowed under the following situations:

(a) When persons or entities occupy danger areas such as esteros, railroad tracks, garbage
dumps, riverbanks, shorelines, waterways, and other public placessuch as sidewalks, roads,
parks, and playgrounds;

(b) When government infrastructure projects with available funding are about to be
implemented;or

(c) When there is a court order for eviction and demolition. (emphasis and underline ours)

A reading of this provision clearly shows that the acts complained of are beyond the scope of a
petition for prohibition and mandamus. The use of the permissive word "may" implies that the public
respondents have discretion when their duty to execute evictions and/or demolitions shall be
performed. Where the words of a statute are clear, plain, and free from ambiguity, it must be given
its literal meaning and applied without attempted interpretation. 18

Consequently, the time when the public respondents shall carry out evictions and/or demolitions
under Section 28 (a), (b), and (c) of RA 7279 is merely discretionary, and not ministerial, judicial or
quasi-judicial. The duty is discretionary if the law imposesa duty upon a public officer and gives him
the right to decide when the duty shall be performed.

530 | P a g e
In contrast, a ministerial duty is one which an officer or tribunal performs in a given state of facts,in a
prescribedmanner, in obedience to the mandate of a legal authority, without regard to or the exercise
of his own judgment upon the propriety or impropriety of the act done. 19

On the other hand, both judicial and quasi-judicial functions involve the determination of what the law
is, and what the legal rights of the contending parties are, with respect tothe matter in controversy
and, on the basis thereof and the facts obtaining, the adjudication of their respective rights. 20

The resolution of the constitutionality of Section 28 (a) and (b) of RA 7279 is not the lis motaof the
case.

Even if we treat the present petition as one for certiorari since it assails the constitutionality of
Section 28 (a) and (b) of RA 7279, the petition must necessarily fail for failure to show the essential
requisites that would warrant the Court’s exercise of judicial review. It is a rule firmly entrenched in
our jurisprudence thatthe courts will not determine the constitutionality of a law unless the following
requisites are present: (1) the existence of an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination; (2) the existence of personal and substantial interest on
the part ofthe party raising the constitutional question; (3) recourse to judicial review is made at the
earliest opportunity; and (4) the resolution of the constitutional question must be necessary to the
decision of the case.21

Save for the petition pertaining to the City of Quezon’s threat of eviction and demolition, this case no
longer presents a justiciable controversy with respect to the Mayors of Navotas and San Juan. We
take note of the Comments of these Mayors who alleged that they had already successfully evicted
the concerned petitioners in their respective cities at the time of the filing of the petition.

What further constrains this Court from touching on the issue of constitutionality is the fact that this
issue is not the lis mota of this case. Lis motaliterally means "the cause of the suit or action"; it is
rooted in the principle of separation of powers and is thus merely an offshoot of the presumption of
validity accorded the executive and legislative acts of our coequal branches of the government.

This means that the petitioner who claims the unconstitutionality of a law has the burden of showing
first that the case cannot be resolved unless the disposition of the constitutional question that he
raised is unavoidable. If there is some other ground upon which the court may rest its judgment, that
course will be adopted and the question of constitutionality should be avoided.  Thus, to justify the
22

nullification ofa law, there must be a clear and unequivocal breach of the Constitution, and not one
that is doubtful, speculative or argumentative. 23

We carefully read the petitions and we conclude that they fail to compellingly show the necessity
ofexamining the constitutionality of Section 28 (a) and (b) of RA 7279 in the light of Sections 1 and 6,
Article 3 of the 1987 Constitution.  In Magkalas v. NHA,  this Court had already ruled on the validity
24 25

of evictions and demolitions without any court order. In that case, we affirmed the validity ofSection 2
of Presidential Decree No. 1472 which authorizes the NHA to summarily eject all informal settlers’
colonies on government resettlement projects as well as any illegal occupant in any homelot,
apartment or dwelling unit owned or administered by the NHA. In that case, we held that Caridad
Magkalas’ illegal possession of the property should not hinder the NHA’s development of Bagong
Barrio Urban Bliss Project. We further stated that demolitions and evictions may be validly carried
out even without a judicial order in the following instances: (1) when the property involved is an
expropriated property xxx pursuant to Section 1 of P.D. No. 1315;

531 | P a g e
 (2) when there are squatters on government resettlement projects and illegal occupants in
any homelot, apartment or dwelling unit owned or administered by the NHA pursuant to
Section 2 of P.D. No. 1472;

(3) when persons or entities occupy danger areas such as esteros, railroad tracks, garbage
dumps, riverbanks, shorelines, waterways and other public places such as sidewalks, roads,
parks and playgrounds, pursuant toSection 28(a) of R.A. No. 7279;

(4) when government infrastructure projects with available funding are about to be
implemented pursuant to Section 28(b) of R.A. No. 7279.  (emphasis ours)
26

We note that Section 10, Article13 of the 1987 Constitution provides that urban or rural poor dwellers
shall not be evicted nor their dwelling demolished, except in accordance withlaw and in a just and
humane manner. Paragraph 1, Section 28 of RA 7279 allows summary evictions and demolition in
cases where persons orentities occupy danger areas and when persons or entities occupy areas
where government infrastructure projects with available funding are about to be implemented.

To ensure that evictions and demolitions are conducted in a just and humane manner, paragraph 2,
Section 28 of RA 7279 commands the public respondents to comply with the following prescribed
procedure in executing eviction and/or demolition orders:

In the execution of eviction or demolition orders involving underprivileged and homeless citizens, the
following shall be mandatory:

(1) Notice upon the effected persons orentities at least thirty (30) days prior to the date of
eviction or demolition;

(2) Adequate consultations on the matter of settlement with the duly designated
representatives of the families to be resettled and the affected communities in the areas
where they are to be relocated;

(3) Presence of local government officials or their representatives during eviction or

demolition;

(4) Proper identification of all persons taking part in the demolition;

(5) Execution of eviction or demolition only during regular office hours from Mondays to
Fridays and during good weather, unless the affected families consent otherwise;

(6) No use of heavy equipment for demolition except for structures that are permanent and of
concrete materials;

(7) Proper uniforms for members ofthe Philippine National Police who shall occupy the first
line of law enforcement and observe proper disturbance control procedures; and

(8) Adequate relocation, whether temporary or permanent: Provided, however, That in cases
of eviction and demolition pursuant to a court order involving underprivileged and homeless
citizens, relocation shall be undertaken by the local government unit concerned and the
National Housing Authority with the assistance of other government agencies within forty-five
(45) days from service of notice of final judgment by the court, after which period the said
order shall be executed: Provided, further, That should relocation not be possible within the

532 | P a g e
 said period, financial assistance in the amount equivalent to the prevailing minimum daily
wage multiplied by sixty (60) days shall be extended to the affected families by the local
government unit concerned.

This Department of the Interior and Local Government and the Housing and Urban Development
Coordinating Council shall jointly promulgate the necessary rules and regulations to carry out the
above provision.

Lastly, the petitioners failed to substantiate their allegations that the public respondents gravely
abused their discretion in implementing Section 28 (a) and (b) of RA 7279. Instead, theymerely
imputed jurisdictional abuse to the public respondents through general averments in their pleading,
but without any basis to support their claim.

This is precisely the reason why we frown upon the direct filing of Rule 65 petitions before the
Court.  To the point of being repetitive, we (xxx source text missing)
1âwphi1

Lastly, the petitioners failed to substantiate their allegations that the public respondents gravely
abused their discretion in implementing Section 28 (a) and (b) of RA 7279. Instead, they merely
imputed jurisdictional abuse to the public respondents through general averments in their pleading,
but without any basis to support their claim.

This is precisely the reason why we frown upon the direct filing of Rule 65 petitions before the Court.
To the point of being repetitive, we emphasize that we are not trier of facts and this applies with
greater force to Rule 65 petitions which are original and independent actions. To justify judicial
intrusion into what is fundamentally the domain of the executive department, the petitioners must
establish facts that are necessarily linked to the jurisdictional problem they presented in this case,
i.e., whether the public respondents exercised their power in an arbitrary and despotic manner by
reason of passion or personal hostility in implementing Section 28 (a) and (b) of RA 7279.

Since the petitioners failed to establish that the public respondents' alleged abuse of discretion was
so patent and gross as to amount to an evasion or to a unilateral refusal to perform the duty enjoined
or to act in contemplation of law, this petition must necessarily fail. 27

WHEREFORE, premises considered, we hereby DISMISS the petition for its serious procedural
defects. No costs.

SO ORDERED.

533 | P a g e
 EN BANC

G.R. No. 184621               December 10, 2013

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
MARIA FE ESPINOSA CANTOR, Respondent.

DECISION

BRION, J.:

The petition for review on certiorari  before us assails the decision  dated August 27, 2008 of the
1 2

Court of Appeals (CA) in CA-G.R. SP No. 01558-MIN which affirmed be order  dated December 15,
3

2006 of the Regional Trial Court (RTC), Branch 25, Koronadal City, South Cotabato, in SP Proc.
Case No. 313-25, declaring Jerry F. Cantor, respondent Maria Fe Espinosa Cantor’s husband,
presumptively dead under Article 41 of the Family Code.

The Factual Antecedents

The respondent and Jerry were married on September 20, 1997. They lived together as husband
and wife in their conjugal dwelling in Agan Homes, Koronadal City, South Cotabato. Sometime in
January 1998, the couple had a violent quarrel brought about by: (1) the respondent’s inability to
reach "sexual climax" whenever she and Jerry would have intimate moments; and (2) Jerry’s
expression of animosity toward the respondent’s father.

After their quarrel, Jerry left their conjugal dwelling and this was the last time that the respondent
ever saw him. Since then, she had not seen, communicated nor heard anything from Jerry or about
his whereabouts.

On May 21, 2002, or more than four (4) years from the time of Jerry’s disappearance, the
respondent filed before the RTC a petition4for her husband’s declaration of presumptive death,
docketed as SP Proc. Case No. 313-25. She claimed that she had a well-founded belief that Jerry
was already dead. She alleged that she had inquired from her mother-in-law, her brothers-in-law, her
sisters-in-law, as well as her neighbors and friends, but to no avail. In the hopes of finding Jerry, she
also allegedly made it a point to check the patients’ directory whenever she went to a hospital. All
these earnest efforts, the respondent claimed, proved futile, prompting her to file the petition in court.

The Ruling of the RTC

After due proceedings, the RTC issued an order granting the respondent’s petition and declaring
Jerry presumptively dead. It concluded that the respondent had a well-founded belief that her
husband was already dead since more than four (4) years had passed without the former receiving
any news about the latter or his whereabouts. The dispositive portion of the order dated December
15, 2006 reads:

WHEREFORE, the Court hereby declares, as it hereby declared that respondent Jerry F. Cantor is
presumptively dead pursuant to Article 41 of the Family Code of the Philippines without prejudice to
the effect of the reappearance of the absent spouse Jerry F. Cantor. 5

534 | P a g e
The Ruling of the CA

The case reached the CA through a petition for certiorari6filed by the petitioner, Republic of the
Philippines, through the Office of the Solicitor General (OSG). In its August 27, 2008 decision, the
CA dismissed the petitioner’s petition, finding no grave abuse of discretion on the RTC’s part, and,
accordingly, fully affirmed the latter’s order, thus:

WHEREFORE, premises foregoing (sic), the instant petition is hereby DISMISSED and the assailed
Order dated December 15, 2006 declaring Jerry F. Cantor presumptively dead is hereby AFFIRMED
in toto.
7

The petitioner brought the matter via a Rule 45 petition before this Court. The Petition The petitioner
contends that certiorari lies to challenge the decisions, judgments or final orders of trial courts in
petitions for declaration of presumptive death of an absent spouse under Rule 41 of the Family
Code. It maintains that although judgments of trial courts in summary judicial proceedings, including
presumptive death cases, are deemed immediately final and executory (hence, not appeal able
under Article 247 of the Family Code), this rule does not mean that they are not subject to review
on certiorari.

The petitioner also posits that the respondent did not have a well-founded belief to justify the
declaration of her husband’s presumptive death. It claims that the respondent failed to conduct the
requisite diligent search for her missing husband. Likewise, the petitioner invites this Court’s
attention to the attendant circumstances surrounding the case, particularly, the degree of search
conducted and the respondent’s resultant failure to meet the strict standard under Article 41 of the
Family Code.

The Issues

The petition poses to us the following issues:

(1) Whether certiorarilies to challenge the decisions, judgments or final orders of trial courts
in petitions for declaration of presumptive death of an absent spouse under Article 41 of the
Family Code; and

(2) Whether the respondent had a well-founded belief that Jerry is already dead.

The Court’s Ruling

We grant the petition.

a. On the Issue of the Propriety of Certiorari as a Remedy

Court’s Judgment in the Judicial

Proceedings for Declaration of
Presumptive Death Is Final and
Executory, Hence, Unappealable

The Family Code was explicit that the court’s judgment in summary proceedings, such as the
declaration of presumptive death of an absent spouse under Article 41 of the Family Code, shall be
immediately final and executory.

535 | P a g e
Article 41,in relation to Article 247, of the Family Code provides:

Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null
and void, unless before the celebration of the subsequent marriage, the prior spouse had been
absent for four consecutive years and the spouse present has a well-founded belief that the absent
spouse was already dead. In case of disappearance where there is danger of death under the
circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two
years shall be sufficient.

For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse
present must institute a summary proceeding as provided in this Code for the declaration of
presumptive death of the absentee, without prejudice to the effect of reappearance of the absent
spouse.

Art. 247. The judgment of the court shall be immediately final and executory. [underscores ours]

With the judgment being final, it necessarily follows that it is no longer subject to an appeal, the
dispositions and conclusions therein having become immutable and unalterable not only as against
the parties but even as against the courts.  Modification of the court’s ruling, no matter how
8

erroneous is no longer permissible. The final and executory nature of this summary proceeding thus
prohibits the resort to appeal. As explained in Republic of the Phils. v. Bermudez-Lorino,  the right to
9

appeal is not granted to parties because of the express mandate of Article 247 of the Family Code,
to wit:

In Summary Judicial Proceedings under the Family Code, there is no reglementary period within
which to perfect an appeal, precisely because judgments rendered thereunder, by express provision
of [Article] 247, Family Code, supra, are "immediately final and executory." It was erroneous,
therefore, on the part of the RTCto give due course to the Republic’s appeal and order the
transmittal of the entire records of the case to the Court of Appeals.

An appellate court acquires no jurisdiction to review a judgment which, by express provision of law,
is immediately final and executory. As we have said in Veloria vs. Comelec, "the right to appeal is
not a natural right nor is it a part of due process, for it is merely a statutory privilege." Since, by
express mandate of Article 247 of the Family Code, all judgments rendered in summary judicial
proceedings in Family Law are "immediately final and executory," the right to appeal was not granted
to any of the parties therein. The Republic of the Philippines, as oppositor in the petition for
declaration of presumptive death, should not be treated differently. It had no right to appeal the RTC
decision of November 7, 2001. [emphases ours; italics supplied]

Certiorari Lies to Challenge the

Decisions, Judgments or Final
Orders of Trial Courts in a Summary
Proceeding for the Declaration of Presumptive
Death Under the Family Code

A losing party in this proceeding, however, is not entirely left without a remedy. While jurisprudence
tells us that no appeal can be made from the trial court's judgment, an aggrieved party may,
nevertheless, file a petition for certiorari under Rule 65 of the Rules of Court to question any abuse
of discretion amounting to lack or excess of jurisdiction that transpired.

As held in Delos Santos v. Rodriguez, et al.,  the fact that a decision has become final does not
10

automatically negate the original action of the CA to issue certiorari, prohibition and mandamus in

536 | P a g e
connection with orders or processes issued by the trial court. Certiorari may be availed of where a
court has acted without or in excess of jurisdiction or with grave abuse of discretion, and where the
ordinary remedy of appeal is not available. Such a procedure finds support in the case of Republic v.
Tango,  wherein we held that:
11

This case presents an opportunity for us to settle the rule on appeal of judgments rendered in
summary proceedings under the Family Code and accordingly, refine our previous decisions
thereon.

Article 238 of the Family Code, under Title XI: SUMMARY JUDICIAL PROCEEDINGS IN THE
FAMILY LAW, establishes the rules that govern summary court proceedings in the Family Code:

"ART. 238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all
cases provided for in this Code requiring summary court proceedings. Such cases shall be decided
in an expeditious manner without regard to technical rules."

In turn, Article 253 of the Family Code specifies the cases covered by the rules in chapters two and
three of the same title. It states:

"ART. 253. The foregoing rules in Chapters 2and 3 hereof shall likewise govern summary
proceedings filed under Articles 41, 51, 69, 73, 96, 124 and 217, insofar as they are
applicable."(Emphasis supplied.)

In plain text, Article 247 in Chapter 2 of the same title reads:

"ART.247. The judgment of the court shall be immediately final and executory."

By express provision of law, the judgment of the court in a summary proceeding shall be
immediately final and executory. As a matter of course, it follows that no appeal can be had of the
trial court's judgment ina summary proceeding for the declaration of presumptive death of an absent
spouse under Article 41 of the Family Code. It goes without saying, however, that an aggrieved party
may file a petition for certiorari to question abuse of discretion amounting to lack of jurisdiction. Such
petition should be filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of
Courts. To be sure, even if the Court's original jurisdiction to issue a writ of certiorari is concurrent
with the RTCs and the Court of Appeals in certain cases, such concurrence does not sanction an
unrestricted freedom of choice of court forum. [emphasis ours]

Viewed in this light, we find that the petitioner’s resort to certiorari under Rule 65 of the Rules of
Court to question the RTC’s order declaring Jerry presumptively dead was proper.

b. On the Issue of the Existence of Well-Founded Belief

The Essential Requisites for the

Declaration of Presumptive Death
Under Article 41 of the Family Code

Before a judicial declaration of presumptive death can be obtained, it must be shown that the prior
spouse had been absent for four consecutive years and the present spouse had a well-founded
belief that the prior spouse was already dead. Under Article 41 of the Family Code, there are four (4)
essential requisites for the declaration of presumptive death:

537 | P a g e
 1. That the absent spouse has been missing for four consecutive years, or two consecutive
years if the disappearance occurred where there is danger of death under the circumstances
laid down in Article 391, Civil Code;

2. That the present spouse wishes to remarry;

3. That the present spouse has a well-founded belief that the absentee is dead; and

4. That the present spouse files a summary proceeding for the declaration of presumptive
death of the absentee. 12

The Present Spouse Has the Burden

of Proof to Show that All the
Requisites Under Article 41 of the
Family Code Are Present

The burden of proof rests on the present spouse to show that all the requisites under Article 41 of
the Family Code are present. Since it is the present spouse who, for purposes of declaration of
presumptive death, substantially asserts the affirmative of the issue, it stands to reason that the
burden of proof lies with him/her. He who alleges a fact has the burden of proving it and mere
allegation is not evidence.
13

Declaration of Presumptive Death

Under Article 41 of the Family Code
Imposes a Stricter Standard

Notably, Article 41 of the Family Code, compared to the old provision of the Civil Code which it
superseded, imposes a stricter standard. It requires a "well-founded belief " that the absentee is
already dead before a petition for declaration of presumptive death can be granted. We have had
occasion to make the same observation in Republic v. Nolasco,  where we noted the crucial
14

differences between Article 41 of the Family Code and Article 83 of the Civil Code, to wit:

Under Article 41, the time required for the presumption to arise has been shortened to four (4) years;
however, there is need for a judicial declaration of presumptive death to enable the spouse present
to remarry. Also, Article 41 of the Family Code imposes a stricter standard than the Civil Code:
Article 83 of the Civil Code merely requires either that there be no news that such absentee is still
alive; or the absentee is generally considered to be dead and believed to be so by the spouse
present, or is presumed dead under Articles 390 and 391 of the Civil Code. The Family Code, upon
the other hand, prescribes as "well founded belief" that the absentee is already dead before a
petition for declaration of presumptive death can be granted.

Thus, mere absence of the spouse (even for such period required by the law), lack of any news that
such absentee is still alive, failure to communicate or general presumption of absence under the
Civil Code would not suffice. This conclusion proceeds from the premise that Article 41 of the Family
Code places upon the present spouse the burden of proving the additional and more stringent
requirement of "well-founded belief" which can only be discharged upon a showing of proper and
honest-to-goodness inquiries and efforts to ascertain not only the absent spouse’s whereabouts but,
more importantly, that the absent spouse is still alive or is already dead.
15

The Requirement of Well-Founded Belief

538 | P a g e
The law did not define what is meant by "well-founded belief." It depends upon the circumstances of
each particular case. Its determination, so to speak, remains on a case-to-case basis. To be able to
comply with this requirement, the present spouse must prove that his/her belief was the result of
diligent and reasonable efforts and inquiries to locate the absent spouse and that based on these
efforts and inquiries, he/she believes that under the circumstances, the absent spouseis already
dead. It requires exertion of active effort (not a mere passive one).

To illustrate this degree of "diligent and reasonable search" required by the law, an analysis of the
following relevant cases is warranted:

i. Republic of the Philippines v. Court of Appeals (Tenth Div.) 16

In Republic of the Philippines v. Court of Appeals (Tenth Div.),  the Court ruled that the present
17

spouse failed to prove that he had a well-founded belief that his absent spouse was already dead
before he filed his petition. His efforts to locate his absent wife allegedly consisted of the following:

(1) He went to his in-laws’ house to look for her;

(2) He sought the barangay captain’s aid to locate her;

(3) He went to her friends’ houses to find her and inquired about her whereabouts among his
friends;

(4) He went to Manila and worked as a part-time taxi driver to look for her in malls during his
free time;

(5) He went back to Catbalogan and again looked for her; and

(6) He reported her disappearance to the local police station and to the NBI.

Despite these alleged "earnest efforts," the Court still ruled against the present spouse. The Court
found that he failed to present the persons from whom he allegedly made inquiries and only reported
his wife’s absence after the OSG filed its notice to dismiss his petition in the RTC.

The Court also provided the following criteria for determining the existence of a "well-founded belief"
under Article 41 of the Family Code:

The belief of the present spouse must be the result of proper and honest to goodness inquiries and
efforts to ascertain the whereabouts of the absent spouse and whether the absent spouse is still
alive or is already dead. Whether or not the spouse present acted on a well-founded belief of death
of the absent spouse depends upon the inquiries to be drawn from a great many circumstances
occurring before and after the disappearance of the absent spouse and the nature and extent of the
inquiries made by [the] present spouse. 18

ii. Republic v. Granada 19

Similarly in Granada, the Court ruled that the absent spouse failed to prove her "well-founded belief"
that her absent spouse was already dead prior to her filing of the petition. In this case, the present
spouse alleged that her brother had made inquiries from their relatives regarding the absent
spouse’s whereabouts. The present spouse did not report to the police nor seek the aid of the mass

539 | P a g e
media. Applying the standards in Republic of the Philippines v. Court of Appeals (Tenth Div.),  the
20

Court ruled against the present spouse, as follows:

Applying the foregoing standards to the present case, petitioner points out that respondent Yolanda
did not initiate a diligent search to locate her absent husband. While her brother Diosdado Cadacio
testified to having inquiredabout the whereabouts of Cyrus from the latter’s relatives, these relatives
were not presented to corroborate Diosdado’s testimony. In short, respondent was allegedly not
diligent in her search for her husband. Petitioner argues that if she were, she would have sought
information from the Taiwanese Consular Office or assistance from other government agencies in
Taiwan or the Philippines. She could have also utilized mass media for this end, but she did not.
Worse, she failed to explain these omissions.

iii.Republic v. Nolasco 21

In Nolasco, the present spouse filed a petition for declaration of presumptive death of his wife, who
had been missing for more than four years. He testified that his efforts to find her consisted of:

(1) Searching for her whenever his ship docked in England;

(2) Sending her letters which were all returned to him; and

(3) Inquiring from their friends regarding her whereabouts, which all proved fruitless. The
Court ruled that the present spouse’s investigations were too sketchy to form a basis that his
wife was already dead and ruled that the pieces of evidence only proved that his wife had
chosen not to communicate with their common acquaintances, and not that she was dead.

iv.The present case

In the case at bar, the respondent’s "well-founded belief" was anchored on her alleged "earnest
efforts" to locate Jerry, which consisted of the following:

(1) She made inquiries about Jerry’s whereabouts from her in-laws, neighbors and friends;
and

(2) Whenever she went to a hospital, she saw to it that she looked through the patients’
directory, hoping to find Jerry.

These efforts, however, fell short of the "stringent standard" and degree of diligence required by
jurisprudence for the following reasons:

First, the respondent did not actively look for her missing husband.  It can be inferred from the
1âwphi1

records that her hospital visits and her consequent checking of the patients’ directory therein were
unintentional. She did not purposely undertake a diligent search for her husband as her hospital
visits were not planned nor primarily directed to look for him. This Court thus considers these
attempts insufficient to engender a belief that her husband is dead.

Second, she did not report Jerry’s absence to the police nor did she seek the aid of the authorities to
look for him. While a finding of well-founded belief varies with the nature of the situation in which the
present spouse is placed, under present conditions, we find it proper and prudent for a present
spouse, whose spouse had been missing, to seek the aid of the authorities or, at the very least,
report his/her absence to the police.

540 | P a g e
Third, she did not present as witnesses Jerry’s relatives or their neighbors and friends, who can
corroborate her efforts to locate Jerry. Worse, these persons, from whom she allegedly made
inquiries, were not even named. As held in Nolasco, the present spouse’s bare assertion that he
inquired from his friends about his absent spouse’s whereabouts is insufficient as the names of the
friends from whom he made inquiries were not identified in the testimony nor presented as
witnesses.

Lastly, there was no other corroborative evidence to support the respondent’s claim that she
conducted a diligent search. Neither was there supporting evidence proving that she had a well-
founded belief other than her bare claims that she inquired from her friends and in-laws about her
husband’s whereabouts. In sum, the Court is of the view that the respondent merely engaged in a
"passive search" where she relied on uncorroborated inquiries from her in-laws, neighbors and
friends. She failed to conduct a diligent search because her alleged efforts are insufficient to form a
well-founded belief that her husband was already dead. As held in Republic of the Philippines v.
Court of Appeals (Tenth Div.),  "[w]hether or not the spouse present acted on a well-founded belief
22

of death of the absent spouse depends upon the inquiries to be drawn from a great many
circumstances occurring before and after the disappearance of the absent spouse and the
natureand extent of the inquiries made by [the] present spouse."

Strict Standard Approach Is

Consistent with the State’s Policy
to Protect and Strengthen Marriage

In the above-cited cases, the Court, fully aware of the possible collusion of spouses in nullifying their
marriage, has consistently applied the "strictstandard" approach. This is to ensure that a petition for
declaration of presumptive death under Article 41 of the Family Code is not used as a tool to
conveniently circumvent the laws. Courts should never allow procedural shortcuts and should ensure
that the stricter standard required by the Family Code is met. In Republic of the Philippines v. Court
of Appeals (Tenth Div.),  we emphasized that:
23

In view of the summary nature of proceedings under Article 41 of the Family Code for the declaration
of presumptive death of one’s spouse, the degree of due diligence set by this Honorable Court in the
above-mentioned cases in locating the whereabouts of a missing spouse must be strictly complied
with. There have been times when Article 41 of the Family Code had been resorted to by parties
wishing to remarry knowing fully well that their alleged missing spouses are alive and well. It is even
possible that those who cannot have their marriages xxx declared null and void under Article 36 of
the Family Code resort to Article 41 of the Family Code for relief because of the xxx summary nature
of its proceedings.

The application of this stricter standard becomes even more imperative if we consider the State’s
policy to protect and strengthen the institution of marriage.  Since marriage serves as the family’s
24

foundation  and since it is the state’s policy to protect and strengthen the family as a basic social
25

institution,  marriage should not be permitted to be dissolved at the whim of the parties. In
26

interpreting and applying Article 41, this is the underlying rationale –to uphold the sanctity of
marriage. Arroyo, Jr.v. Court of Appeals  reflected this sentiment when we stressed:
27

[The]protection of the basic social institutions of marriage and the family in the preservation of which
the State has the strongest interest; the public policy here involved is of the most fundamental kind.
In Article II, Section 12 of the Constitution there is set forth the following basic state policy:

The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic
autonomous social institution.

541 | P a g e
Strict Standard Prescribed Under
Article 41 of the Family Code
Is for the Present Spouse’s Benefit

The requisite judicial declaration of presumptive death of the absent spouse (and consequently, the
application of a stringent standard for its issuance) is also for the present spouse's benefit. It is
intended to protect him/her from a criminal prosecution of bigamy under Article 349 of the Revised
Penal Code which might come into play if he/she would prematurely remarry sans the court's
declaration.

Upon the issuance of the decision declaring his/her absent spouse presumptively dead, the present
spouse's good faith in contracting a second marriage is effectively established. The decision of the
competent court constitutes sufficient proof of his/her good faith and his/her criminal intent in case of
remarriage is effectively negated.  Thus, for purposes of remarriage, it is necessary to strictly comply
28

with the stringent standard and have the absent spouse judicially declared presumptively dead.

Final Word

As a final word, it has not escaped this Court's attention that the strict standard required in petitions
for declaration of presumptive death has not been fully observed by the lower courts. We need only
to cite the instances when this Court, on review, has consistently ruled on the sanctity of marriage
and reiterated that anything less than the use of the strict standard necessitates a denial. To rectify
this situation, lower courts are now expressly put on notice of the strict standard this Court requires
in cases under Article 41 of the Family Code.

WHEREFORE, in view of the foregoing, the assailed decision dated August 27, 2008 of the Court of
Appeals, which affirmed the order dated December 15, 2006 of the Regional Trial Court, Branch 25,
Koronadal City, South Cotabato, declaring Jerry F. Cantor presumptively dead is hereby
REVERSED and SET ASIDE.

SO ORDERED. 

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